Saudi Arabia has initiated new 'city' launches as well as tourist focussed mega destinations, all of this against a backdrop of uncertain oil prices. Image Credit: Bloomberg

Riyadh: Saudi Arabia is preparing to return to global capital markets with a bond sale aimed at raising about $5 billion to help cover financing needs heightened by last year's slide in oil prices.

The kingdom is close to hiring banks for a sale earmarked for as early as this month. No final decision on the timing has been made and the country may still put off the sale should market conditions deteriorate. The Finance Ministry in Riyadh didn't immediately respond to requests for comment.

Though the price of oil has rebounded about 45 per cent to more than $55 a barrel since the end of October, it remains below the $80 level the country needs to balance its budget at a time when global COVID-19 infections show little sign of slowing. Saudi Arabia still expects to narrow its fiscal deficit this year after spending cuts reduced its funding needs.

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Reticent so far

Saudi Arabia surprised investors by staying away from foreign capital markets in the second-half of last year, opting to cover almost all of its budget deficit via domestic borrowing. The kingdom's total outstanding debt stands at almost $228 billion.

Emerging-market bond sales have got off to a brisk start this year as borrowing costs tumbled following unprecedented stimulus by central banks to shore up economies during the pandemic. Governments and companies in the Gulf will issue about $120 billion of dollar and Islamic securities this year, according to Franklin Templeton. That compares with a record $126 billion last year.