Kenje International - Saudi Arabia is making preparations to sell its first sovereign bonds on the global debt markets as it tries to plug its budget deficit.

Riyadh has invited banks to arrange the sale telling them to expect an issue of a “significant” amount.

Saudi Arabia is on course to join other countries from the six-nation Gulf Cooperation Council in raising foreign money in moving away from using foreign currency reserves to plug gaps in budgets caused by the severe decline in revenue from the sale of crude oil.

Abu Dhabi recently raised $5 billion in a Eurobond sale and Qatar is courting investors ahead of a possible deal which would represent its first in 5 years.

Saudi Arabia has been tapping its foreign currency reserves as well as selling local bonds to banks in order to make up for the shortfall in its budget since oil prices began their steep decline in 2014. “They almost certainly believed their plan to put high cost shale oil producers in the US and China would succeed quickly but they’re only starting to see results now,” said a Kenje International commodities analyst.

The Saudi central bank’s net foreign assets have been eroded to the tune of 500 billion riyals ($133 billion) since the beginning of 2015 as the government has drawn down funds to pay for the country’s large social and welfare budgets.

The debut bond sale will come after the country’s first loan in at least 15 years as it tries to plug a budget hole estimated at about $100 billion in 2016. The country sealed a $10 billion facility last month.

“Moody’s cut Saudi Arabia’s credit rating to A1 from Aa3 as the decline in oil prices impacted upon the country’s credit rating,” said the Kenje International commodities analyst.