Goldman Sachs indicated that the recent increase in global oil prices has significantly reduced fiscal risks in Gulf Cooperation Council (GCC) economies and limited their need to issue debt denominated in foreign currency. It noted that GCC governments based their 2018 budgets on oil prices in the $45 p/b to $55 p/b range, which is well below its forecast of $75 p/b in 2018. However, under its oil price assumptions, the bank expected the fiscal deficits of many GCC countries to narrow significantly this year in case oil prices remain at their current level and governments adhere to their 2018 expenditure plans. 

In addition, Goldman Sachs said that Oman's $6.5bn bond issuance, Qatar's $12bn issuance and the UAE's $1bn debt issuance earlier this year would more than cover their fiscal deficits in 2018 in case of an oil price of $75 p/b. As such, it considered that any additional issuance this year would serve to increase the countries' foreign assets, unless they deviate significantly from their 2018 expenditure plans. However, it noted that Saudi Arabia, Bahrain and Kuwait would still need to finance their deficits this year, and would face a trade-off between drawing down from their foreign assets or seeking global markets to finance their 2018 budgeted expenditures. It considered that Saudi Arabia's debt level would rise at a much slower pace with an average oil price of $75 p/b, which would leave room to finance the remaining expenditures from reserves or from domestic debt issuance. Also, it expected that Bahrain would have the largest fiscal deficit regionally in 2018, given its high fiscal oil break-even price. It added that Bahrain's $1bn issuance in 2018 would be just enough to cover its deficit in case of higher oil prices, but would not leave much room for any fiscal slippage. In parallel, it expected Kuwait to post a small fiscal deficit this year despite higher oil revenues, given that the country's deficit largely stems from the mandatory share of revenues that are held at the Future Generations Fund. 
Source: Goldman Sachs