KSA Sukuk Limited (Kingdom Saudi Arabia) - Supplement Dated 22 January 2020

Transcription

1. SUPPLEMENT DATED 22 January 2020 TO THE BASE PROSPECTUS DATED 25 OCTOBER 2019 KSA SUKUK LIMITED (an exempted company incorporated in the Cayman Islands with limited liability) Trust Certificate Issuance Programme This Supplement (the “Supplement”) comprises a supplement for KSA Sukuk Limited (the “Trustee”) and the Kingdom of Saudi Arabia (the “Kingdom”, “Saudi Arabia” or the “Government”) to the base prospectus dated 25 October 2019 (the “Base Prospectus”). The Base Prospectus is a prospectus prepared in connection with the Trust Certificate Issuance Programme (the “Programme”) established by the Trustee and the Kingdom and comprises a base prospectus for the purposes of Article 8 of the Prospectus Regulation. This Supplement constitutes a supplement to the Base Prospectus for the purposes of Article 23 of the Prospectus Regulation. When used in this Supplement, Prospectus Regulation means Regulation (EU) 2017/1129. Terms defined in the Base Prospectus have the same meaning when used in this Supplement. This Supplement is supplemental to, and should be read in conjunction with, the Base Prospectus and any other supplements to the Base Prospectus issued by the Trustee and the Kingdom. This Supplement will be published on the website of the Regulatory News Service operated by the London Stock Exchange at http://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html. Each of the Trustee and the Kingdom accepts responsibility for the information contained in this Supplement. To the best of the knowledge of the Trustee and the Kingdom, the information contained in this Supplement is in accordance with the facts and does not omit anything likely to affect the import of such information. This Supplement has been approved by the United Kingdom Financial Conduct Authority (the “FCA”) as competent authority under the Prospectus Regulation. The FCA only approves this Supplement as meeting the standards of completeness, comprehensibility and consistency imposed by the Prospectus Regulation. Approval by the FCA should not be considered as an endorsement of the Trustee or the Kingdom or of the quality of the Trust Certificates that are the subject of the Base Prospectus (as supplemented by this Supplement). Investors should make their own assessment as to the suitability of investing in the Trust Certificates. This Supplement is being prepared for the purposes of providing an update on recent developments, including certain quarterly 2019 macroeconomic data and developments, and effecting certain other amendments to the Base Prospectus. Prospective investors should also read the detailed information set out in the Base Prospectus prior to making any investment decision and particularly the “Risk Factors” in the Base Prospectus. The Delegate, the Arrangers, the Dealers and the Agents (as defined in the Conditions) have not (and none of their respective affiliates have) independently verified the information contained herein. Accordingly, none of the Delegate, the Arrangers, the Dealers, the Agents or any of their respective affiliates makes any 1
2. representation or warranty or accepts any responsibility as to the accuracy or completeness of the information contained in this Supplement and none of the Arrangers , the Dealers or the Agents (nor any of their respective affiliates) accepts any responsibility for any acts or omissions of the Trustee, the Kingdom or any other person in connection with this Supplement or the issue and offering of any Trust Certificates under the Programme. Recent Developments The following developments have taken place since 25 October 2019, the date of the Base Prospectus (where applicable, the page(s) on which the primary original disclosure in respect of the relevant item appeared in the Base Prospectus has been indicated in brackets): Recent Developments to “Risk Factors – Saudi Arabia is located in a region that has been subject to ongoing political and security concerns” (The following paragraph hereby replaces the second paragraph of the section titled “Risk Factors – Saudi Arabia is located in a region that has been subject to ongoing political and security concerns” starting on page 15 of the Base Prospectus) Tensions have persisted between Saudi Arabia and Iran, as exemplified in January 2016 by Saudi Arabia recalling its ambassador to Iran. In addition, on 8 May 2018, the United States announced its withdrawal from the comprehensive agreement between the U.N. Security Council’s five permanent members plus Germany and Iran that was reached on July 2015, reinstating U.S. nuclear sanctions on the Iranian regime. The United States also announced that it would not renew exceptional waivers for importing Iranian oil for several oil-importing countries, effective from May 2019, and on 2 January 2020, the United States carried out a military strike which killed a senior Iranian military commander. As a result of this military strike, Iran launched missiles at a US base in Iraq. Any continuation or increase in international or regional tensions regarding Iran including further attacks on or seizures of oil tankers which disrupt international trade, including any impairment of trade flow through the Strait of Hormuz, or any military conflict, could have a destabilising impact on the Gulf region, including with respect to Saudi Arabia and its ability to export oil. Recent Developments to “Economy of Saudi Arabia – Gross Domestic Product” (The following language is hereby included at the end of the section entitled “Economy of Saudi Arabia – Gross Domestic Product” starting on pages 149 of the Base Prospectus) Based on preliminary figures, Saudi Arabia’s real GDP (based on constant 2010 prices) was SAR 1,954.9 billion (U.S.$521.3 billion) in the nine month period ended 30 September 2019, representing an increase of 0.6 per cent. in real terms as compared to real GDP of SAR 1,944.1 billion (U.S.$518.4 billion) in the nine month period ended 30 September 2018. Saudi Arabia’s nominal GDP was SAR 2,203.9 billion (U.S.$587.7 billion) in the nine month period ended 30 September 2019, representing an increase of 1.0 per cent. in nominal terms as compared to nominal GDP of SAR 2,183.1 billion (U.S.$582.2 billion) in the nine month period ended 30 September 2018. Based on preliminary figures, the non-oil sector grew by 3.1 per cent. in real terms in the nine month period ended 30 September 2019 to reach SAR 1,125.8 billion (U.S.$300.2 billion) and grew by 4.2 per cent. in nominal terms in the same period to reach SAR 1,504.0 billion (U.S.$401.1 billion) compared to the same period in 2018. Within the non-oil sector, the private sector grew by 3.3 per cent. in real terms in the nine month period ended 30 September 2019 to reach SAR 798.9 billion (U.S.$213.0 billion) and grew by 3.7 per cent. in nominal terms in the same period to reach SAR 1,008.2 billion (U.S.$268.9 billion) compared to the same period in 2018. Growth in the non-oil sector was driven by growth in both the private and the government sectors. The following table sets forth the contribution by economic activity to Saudi Arabia’s real GDP, at constant 2010 prices, for each of the nine month periods ended 30 September 2019 and 2018, respectively. 2
3. 752 ,068 743,772 8,295 266,591 235,050 68,510 166,540 179,547 Nine months ended 30 September 2018 Growth Contribution (%) Amount (%) (SAR millions, except percentages) 38.4 (2.8) 773,965 39.8 38.0 (2.9) 766,037 39.4 0.4 4.6 7,928 0.4 13.6 2.0 261,274 13.4 12.0 (1.6) 238,773 12.3 3.5 (2.9) 70,560 3.6 8.5 (1.0) 168,212 8.7 9.2 5.2 170,619 8.8 200,020 10.2 5.5 189,563 9.8 2.9 120,247 87,839 47,896 42,409 27,495 (15,975) 1,943,186 11,669 1,954,856 6.2 4.5 2.5 2.2 1.4 0.8 99.4 0.6 100.0 5.6 3.6 1.2 6.5 (4.5) 3.5 0.5 8.8 0.6 113,845 84,811 47,312 39,830 28,804 (15,423) 1,933,372 10,730 1,944,101 5.9 4.4 2.4 2.0 1.5 0.8 99.4 0.6 100.0 1.8 (3.0) 0.4 5.4 2.2 (0.4) 2.0 (26.3) 1.8 817,395 1,125,791 798,861 326,931 41.8 57.6 40.9 16.7 (2.9) 3.1 3.3 2.6 841,637 1,091,735 773,221 318,514 43.3 56.2 39.8 16.4 1.8 2.2 1.8 3.0 Amount Mining and quarrying .................... Oil and gas (excluding oil refining) Other mining and quarrying ..... Government services...................... Manufacturing ............................... Oil refining ............................... Other manufacturing ................. Wholesale and retail trade, restaurants and hotels ............................................. Finance, insurance, real estate and business services .......................................... Transport, storage and communication Construction................................... Agriculture, forestry and fishing .... Community, social and personal services Electricity, gas and water ............... Less imputed banking services ....... Sub-total (excluding import duties) Import duties .................................. Total real GDP ............................. Real GDP by Oil and Non-Oil Sector Oil Sector .................................... Non-oil sector ............................. Private sector ......................... Government sector ................. 2019(1) Contribution (%) Source: GASTAT Notes: (1) Preliminary figures. 3 Growth (%) 2.2 2.2 2.8 3.2 2.1 (1.8) 3.8 0.8
4. The following table sets forth the contribution by economic activity to Saudi Arabia ’s nominal GDP for each of the nine month periods ended 30 September 2019 and 2018, respectively. Nine months ended 30 September 611,265 600,941 10,325 425,967 278,623 77,267 201,356 218,512 2018 Growth Contribution (%) Amount (%) (SAR millions, except percentages) 27.7 (6.0) 649,972 29.8 27.3 (6.1) 640,130 29.3 0.4 4.9 9,842 0.5 19.3 5.2 404,801 18.5 12.6 (1.4) 282,456 12.9 3.5 (2.9) 79,546 3.6 9.1 (0.8) 202,911 9.3 9.9 5.4 207,265 9.5 276,703 12.6 4.5 264,774 12.1 4.0 133,798 122,299 51,214 50,421 37,734 (17,682) 2,188,854 15,090 2,203,944 6.1 5.5 2.3 2.3 1.7 0.8 99.3 0.7 100.0 6.1 7.7 1.1 7.4 (5.0) 5.0 0.9 9.2 1.0 126,071 113,552 50,589 46,904 39,736 (16,840) 2,169,279 13,824 2,183,103 5.8 5.2 2.3 2.1 1.8 0.8 99.4 0.6 100.0 3.6 (2.4) 0.4 6.9 19.4 15.0 (23.4) 14.7 684,891 1,503,963 1,008,192 495,771 31.1 68.2 45.7 22.5 (5.7) 4.2 3.7 5.3 726,211 1,443,068 972,278 470,789 33.3 66.1 44.5 21.6 36.9 6.5 3.9 12.1 Amount Mining and quarrying .................... Oil and gas (excluding oil refining) Other mining and quarrying ..... Government services...................... Manufacturing ............................... Oil refining ............................... Other manufacturing ................. Wholesale and retail trade, restaurants and hotels ............................................. Finance, insurance, real estate and business services .......................................... Transport, storage and communication Construction................................... Agriculture, forestry and fishing .... Community, social and personal services Electricity, gas and water ............... Less imputed banking services ....... Sub-total (excluding import duties) Import duties .................................. Total nominal GDP ...................... Nominal GDP by Oil and Non-Oil Sector Oil Sector .................................... Non-oil sector ............................. Private sector ......................... Government sector ................. 2019(1) Contribution (%) Growth (%) 38.0 38.7 6.5 13.3 12.7 27.0 8.0 1.6 Source: GASTAT Notes: (1) Preliminary figures. Recent Developments to “Balance of Payments and Foreign Trade” (The following language is hereby included at the end of the section entitled “Balance of Payments and Foreign Trade” starting on page 154 of the Base Prospectus) The following table sets forth Saudi Arabia’s balance of payments for the nine months ended 30 September 2019 and the years ended 31 December 2018, 2017, 2016, 2015 and 2014, respectively. Nine months ended 30 September 2019(1) 1. Current account (A+B+C+D)............... A. Goods ..................................................... B. Services .................................................. —Transport ........................................... —Travel ................................................ —Construction ...................................... —Insurance and pensions services ........ —Financial services .............................. —Telecommunications .......................... —Other business services...................... —Government goods and services ........ C. Primary income ...................................... 144,373 364,601 (144,044) (33,499) 4,755 (18,380) (4,574) (2,680) (3,856) (18,856) (66,953) 27,510 4 2018 264,774 632,811 (240,714) (42,023) (10,700) (24,028) (5,891) (8,220) (5,369) (38,980) (105,501) 26,675 Year ended 31 December 2017 2016 2015 39,241 369,229 (226,663) (43,115) (20,610) (21,020) (5,479) (3,165) (9,507) (35,322) (88,445) 40,117 (SAR millions) (89,410) (212,714) 209,115 165,995 (198,803) (275,858) (44,889) (64,665) (20,858) (34,560) (20,797) (18,570) (5,079) (6,869) (1,245) (2,061) (9,287) (9,950) (23,498) (20,385) (73,151) (118,798) 58,976 64,800 2014 276,593 689,981 (330,107) (63,902) (59,548) (16,047) (7,061) (3,735) (10,392) (29,521) (139,901) 61,972
5. Nine months ended 30 September 2019 (1) —Compensation of employees............... —Investment income ............................. —Direct investment ............................... —Portfolio investment........................... —Other investment................................ D. Secondary income .................................. 2. Capital account ..................................... 3. Financial account (A+B+C+D) ............. A. Direct investment ................................... B. Portfolio investments.............................. C. Other investments................................... D. Reserve assets ........................................ —Monetary gold ................................... —Special drawing rights ....................... —Reserve position in the IMF ............... —Currency and deposits ....................... —Securities ........................................... Net errors and omissions .......................... (1,492) 29,002 (1,459) 21,509 8,952 (103,695) (4,839) 133,673 31,110 8,442 79,125 14,996 0 703 2,580 21,482 (9,769) (5,860) 2018 (2,163) 28,839 (4,311) 23,436 9,714 (153,998) (8,733) 252,691 70,276 14,294 167,500 621 0 1,021 414 40,535 (41,348) (3,350) Year ended 31 December 2017 2016 2015 (1,838) 41,955 1,260 35,330 5,365 (143,442) (6,931) 27,985 21,987 (9,521) 163,180 (147,652) 0 1,712 (1,501) (28,546) (119,317) (4,324) (SAR millions) (2,014) (2,560) 60,989 67,360 4,111 (3,792) 51,620 69,151 5,258 2,000 (158,698) (167,651) (3,365) (3,983) (342,584) (274,058) 5,564 (10,317) (42,798) 40,386 (3,021) 130,630 (302,328) (434,758) 0 0 (6,166) (278) (3,953) (3,473) (150,138) 61,610 (142,071) (492,616) (249,808) (57,361) 2014 (2,446) 64,418 (18,835) 81,911 1,343 (145,252) (1,233) 239,947 (9,809) 100,426 124,474 24,857 0 (2,127) (4,651) (14,318) 45,953 (35,413) Source: SAMA Notes: (1) Estimated figures. Estimated figures for Saudi Arabia’s balance of payments for the nine months ended 30 September 2019 indicate that Saudi Arabia’s current account recorded a surplus of SAR 144.4 billion (U.S.$38.5 billion), compared to a surplus of SAR 264.8 billion (U.S.$70.6 billion) for the year ended 31 December 2018. Based on estimated figures, Saudi Arabia’s capital account recorded an outflow of SAR 4.8 billion (U.S.$1.3 billion) for the nine months ended 30 September 2019, compared to an outflow of SAR 8.7 billion (U.S.$2.3 billion) for the year ended 31 December 2018, which declined primarily as a result of a decrease in capital transfers. Based on estimated figures, Saudi Arabia’s financial account increased by SAR 133.7 billion (U.S.$35.7 billion) in the nine months ended 30 September 2019, compared to an increase of SAR 252.7 billion (U.S.$67.4 billion) in the year ended 31 December 2018, which was primarily attributable to increased inflows of reserve assets. Recent Developments to “Monetary and Financial System” (The following language is hereby included at the end of the section entitled “Monetary and Financial System” starting on page 190 of the Base Prospectus) The following table sets forth SAMA’s balance sheet data as at 30 November 2019 and as at 31 December 2018, 2017, 2016, 2015 and 2014, respectively. As at 30 November 2019 (1) As at 31 December 2018 2017 2016 2015 2014 234,505 34,516 401,144 237,212 39,300 552,360 216,132 35,240 510,972 (SAR millions) Assets: Foreign currencies and gold ................. Cash in vault ........................................ Deposits with banks abroad ................. 265,760 48,269 417,474 243,449 32,584 405,572 5 229,188 25,831 377,966
6. Investments in foreign securities .......... 1,183,943 4,063 1,204,035 14,224 1,244,669 26,009 1,365,189 41,517 1,505,023 39,487 1,998,580 31,185 1,919,508 1,899,864 1,903,663 2,076,871 2,373,382 2,792,109 265,759 243,449 229,188 234,505 237,212 216,132 548,205 112,895 562,367 116,852 641,378 88,346 730,580 154,514 1,023,304 142,074 1,378,948 182,270 103,599 99,943 97,534 97,839 98,117 92,558 Other liabilities .................................... 136,229 100,559 775,261 17,190 116,326 743,738 18,469 138,786 689,962 18,490 164,755 676,187 11,213 182,947 678,515 9,695 427,815 484,692 Total liabilities.................................... 1,919,508 1,899,864 1,903,663 2,076,871 2,373,382 2,792,109 Other assets .......................................... Total assets ......................................... Liabilities: Currency issued ................................... Deposits and reserves of the central Government ......................................... Deposits of Government institutions .... Regulatory deposits for financial institutions ........................................... Foreign institutions’ deposits in local currency ............................................... SAMA bills and repurchase agreements(2) Source: SAMA Notes: (1) Preliminary Figures. (2) Representing monetary policy instruments. Based on preliminary figures, the Kingdom’s commercial banks’ total assets, excluding overseas branches, reached SAR 2,575.2 billion (U.S.$686.7 billion) as at 30 November 2019, compared to SAR 2,398.1 billion (U.S.$639.5 billion) as at 31 December 2018 and SAR 2,350.9 billion (U.S.$626.9 billion) as at 31 December 2017. Inflation The following table sets forth the consumer price index and the percentage change of consumer prices in Saudi Arabia for each of the periods indicated. Three months ended 30 September Twelve months ended 30 September 2019(2) 2019(2) (1) CPI Index .................................................................. 106.1 CPI Index Inflation (%) ................................................ 0.4 Year ended 31 December 2018 106.1 (1.1) 2017 107.3 2.5 2016 104.7 (0.8) 2015 105.6 2.0 103.5 1.3 ______________________ Source: GASTAT Notes: (1) CPI index based on 2013=100 (2) Preliminary figures In the three month period ended 30 September 2019, the CPI Index increased by 0.4 per cent. to reach 106.1. In the twelve month period ended 30 September 2019, the CPI Index decreased by 1.1 per cent. The main contributor to the decrease was a 6.3 per cent decrease in housing, water, electricity, gas and other fuels (which accounts for 25.3 per cent. of the total CPI Index). Interest Rates The following table sets forth the monthly average SAIBOR, repo rate and reverse repo rate as at 30 November 2019 and 31 December 2018, 2017, 2016, 2015 and 2014, respectively. As at 30 November As at 31 December 2019 2018 SAIBOR (three-month average) ...................................................... 2.2303 6 2.4510 2017 1.8114 2016 2.0670 2015 0.8804 2014 0.9358
7. Repo rate .......................................................................................... 2.2500 Reverse repo rate ............................................................................. 1.7500 3.0000 2.5000 2.0000 1.5000 2.0000 0.7500 2.0000 0.5000 2.0000 0.2500 Source: SAMA Money Supply The following table sets forth an analysis of Saudi Arabia’s money supply as at 30 November 2019 and as at 31 December 2018, 2017, 2016 and 2015, respectively. As 30 November 2019 2018 Currency outside banks .................................................................... 188,430 Demand deposits .............................................................................. 1,107,339 (1) M1 ................................................................................................. 1,295,770 Time and savings deposits ............................................................... 426,828 M2(2)................................................................................................. 1,722,597 Other quasi-monetary deposits ......................................................... 193,459 M3(3)................................................................................................. 1,916,056 180,132 1,040,665 1,220,797 443,022 1,663,820 189,826 1,853,645 As at 31 December 2017 2016 (SAR millions) 172,046 170,323 1,002,468 976,086 1,174,514 1,146,409 454,152 496,019 1,628,666 1,642,429 176,505 157,279 1,805,171 1,799,708 2015 168,492 980,151 1,148,642 439,377 1588,020 197,562 1,785,582 Source: SAMA Notes: (1) Currency outside banks plus demand deposits. (2) M1 plus time and savings deposits. (3) M2 plus other quasi-monetary deposits. In the eleven month period ended 30 November 2019, M1, M2 and M3 experienced a slight increase. M3, the broadest measure for domestic liquidity in Saudi Arabia (which comprises currency outside banks and aggregate bank deposits), increased to SAR 1,916.5 billion (U.S.$511.1 billion) as at 30 November 2019, compared to SAR 1,853.6 billion (U.S.$494.3 billion) as at 31 December 2018. This was mainly attributable to an increase of 6.4 per cent. in demand deposits which reached SAR 1,107.3 billion (U.S.$298.3 billion) as at 30 November 2019. Monetary Survey The following table sets forth details of the monetary survey, which is the consolidated balance sheet for Saudi Arabia’s banking system (inclusive of “SAMA”), as at 30 November 2019 and 31 December 2018, 2017, 2016, 2015 and 2014, respectively. As at 30 November As at 31 December 2019 2018 2017 2016 2015 2014 (SAR millions) Assets: Foreign assets (net) ........................................................... —SAMA foreign assets.................................................. —Commercial banks’ foreign assets ............................. Bank claims on private sector ........................................... Bank claims on public sector ............................................ Bank claims on non-financial public sector enterprises .... Total assets ...................................................................... Liabilities: Currency outside banks ..................................................... Demand deposits............................................................... Time and savings deposits ................................................ Other quasi-money deposits(1) ........................................... Government deposits(2) ..................................................... Other items (net) ............................................................... 1,930,342 1,853,947 76,395 1,527,594 379,954 57,828 1,956,765 1,835,866 120,899 1,445,252 305,154 53,765 1,976,292 1,833,355 142,938 1,405,210 254,545 53,823 2,120,078 1,982,348 137,730 1,417,920 178,416 55,336 2,506,009 2,283,382 222,627 1,384,858 86,158 38,986 2,868,596 2,715,989 152,607 1,270,481 53,259 46,088 3,895,718 3,760,936 3,689,871 3,771,750 4,016,011 4,238,425 188,430 1,107,339 426,828 193,459 655,457 1,324,204 180,132 1,040,665 443,022 189,826 681,492 1,225,799 172,046 1,002,468 454,152 176,505 737,716 1,146,983 170,323 976,086 496,019 157,279 875,424 1,096,619 168,492 980,151 439,377 197,562 1,162,521 1,067,908 153,750 991,384 403,419 193,335 1,560,706 935,829 7
8. As at 30 November As at 31 December 2019 Total liabilities ................................................................. 2018 3,895,718 3,760,936 2017 2016 (SAR millions) 3,689,871 3,771,750 2015 4,016,011 2014 4,238,425 ______________________ Source: SAMA Notes: (1) Comprises residents’ foreign currency deposits, marginal deposits for letters of credit, outstanding remittances, and banks repo transactions with the private sector. (2) Including letters of credit and documents for collection. The total assets of Saudi Arabia’s banking system (including “SAMA”) increased by 3.6 per cent. to SAR 3,895.7 billion (U.S.$1,038.9 billion) as at 30 November 2019 from SAR 3,760.9 billion (U.S.$1,002.9 billion) as at 31 December 2018. Reserve Assets The following table sets forth a breakdown of the Government’s reserve assets, as at 30 November 2019 and 31 December 2018, 2017, 2016, 2015 and 2014, respectively. As at 30 November 2019 As at 31 December 2018 2017 2016 Investment in foreign securities ........................ 1,624 31,294 8,425 659,119 1,175,095 1,624 30,333 6,190 625,757 1,198,305 (SAR millions) 1,624 1,624 29,313 27,601 5,776 7,277 585,222 613,768 1,239,653 1,358,970 Total reserve assets ......................................... 1,875,557 1,862,209 1,861,588 Monetary gold................................................... Special drawing rights ...................................... IMF reserve position ......................................... Foreign currency and deposits abroad ............... 2,009,239 2015 2014 1,624 33,767 11,230 763,906 1,501,041 1,624 34,045 14,703 702,296 1,993,657 2,311,567 2,746,324 ______________________ Source: SAMA Recent Developments to “Public Finance” (The following language is hereby included at the end of the section entitled “Public Finance” starting on page 211 of the Base Prospectus) Third Quarter 2019 Budget Performance The following table sets forth the actual revenues, expenditure and overall surplus/deficit of the Government for the nine month period ended 30 September 2019 and 2018. Nine months ended 30 September 2019 2018 Actual Actual (SAR millions) Revenue: Oil revenues ..................................................................................... Non-oil revenues .............................................................................. Total Revenues ............................................................................... Expenditure: Capital expenditures ........................................................................ Current expenditures ........................................................................ Total expenditures ......................................................................... Surplus/(deficit).............................................................................. Source: Ministry of Finance 8 475,840 237,481 713,320 452,062 211,051 663,113 121,651 629,522 751,173 (37,852) 110,300 601,790 712,090 (48,977)
9. 2020 Government Budget Saudi Arabia announced its 2020 budget on 9 December 2019 . The Government has indicated that the focus of the 2020 budget will be the continued implementation of the Vision 2030 programmes, initiatives and projects, including diversification of the economy and growth of the non-oil GDP, particularly in light of lower oil revenues. The 2020 budget indicates that the main fiscal challenges in the medium term are expected to be on-going global trade tensions and volatility of global markets, oil price volatility, supporting private sector/non-oil economic growth and the creation of sufficient employment opportunities in the private sector. Revenues. The 2020 budget estimates total Government revenues to be lower at SAR 833.1 billion (U.S.$222.1 billion), a decrease of 9.1 per cent. compared to estimated revenues of SAR 916.5 billion (U.S.$244.5 billion) in the fiscal year 2019 (and below the budgeted revenues for fiscal year 2019 of SAR 975.3 billion), based on preliminary figures. The principle driver of lower Government revenues in both fiscal years 2019 and 2020 is expected to be lower oil revenues as a result of the production cuts agreed with OPEC and certain non-OPEC states, offset in part by increased non-oil revenues with improvements in economic activity and government initiatives focused on increasing non-oil revenues. Average oil production up to October 2019 was approximately 9.8 million barrels per day, a decline of 3.8% on an annual basis, whereas the average price of Brent crude was U.S.$64.2 compared to U.S.$73.1 during the same period in 2018. However, Government revenues benefitted from special dividends on oil revenues in fiscal year 2019 of SAR 75.0 billion (U.S.$20.0 billion). Oil revenues are expected to generate SAR 513.0 billion (U.S.$136.8 billion) in fiscal year 2020, a decrease of 14.8 per cent. compared to estimated oil revenues of SAR 602.0 billion (U.S.$160.5 billion) in the fiscal year 2019. Tax revenues are only expected to increase modestly in 2020 due to the collection of non-recurrent amounts in 2019. Expenditures. The 2020 budget estimates total Government expenditure at SAR 1,020.1 billion (U.S.$272.0 billion), a decrease of 2.8 per cent. compared to estimated expenditures of SAR 1,048.0 billion (U.S.$279.5 billion) in the fiscal year 2019, based on preliminary figures (and also below budgeted expenditures for fiscal year 2019 of SAR 1,106.0 billion). The lower than budgeted Government expenditure amount in fiscal year 2019 was mainly driven by lower capital expenditures as well as small reduction in operational expenditures, in both cases, as a result of efficiency initiatives. Capital expenditure in fiscal year 2020 is estimated at SAR 173.0 billion (U.S.$46.1 billion), a slight increase of 0.6 per cent. compared to estimated capital expenditure of SAR 172.6 billion (U.S.$45.9 billion) in the fiscal year 2019, and include a number of Vision 2030 related investments, including allocations to “mega” projects and implementation of investment projects in municipal services, health, education, infrastructure, transportation and other sectors. Deficit. The deficit in the 2020 budget is projected at SAR 187.0 billion (U.S.$49.9 billion), an increase of 42.7 per cent. compared to the estimated deficit of SAR 131.2 billion (U.S.$34.9 billion) in the fiscal year 2019, based on preliminary figures. In the fiscal year 2020, the budget deficit is estimated to be 6.4% of GDP. The budget deficit is projected to gradually decrease in the medium-term. By the end of fiscal year 2022, the budget deficit is projected to decline to 2.9% of GDP. Key assumptions and risks. The 2020 budget estimates preliminary real GDP growth of 0.4% in fiscal year 2019, with an increase to real GDP growth of approximately 2.3 per cent. and nominal GDP growth of 3.2 per cent. in fiscal year 2020, driven by non-oil GDP growth. This compares to IMF projections of 2.2 per cent. real GDP growth for Saudi Arabia in fiscal years 2020 and 2021 (based on October 2019 IMF projections). The 2020 budget does not disclose oil price assumptions for fiscal year 2020, but notes that Saudi Arabia aims to play a leading role regarding the output shares set as per agreements reached with OPEC. The 2020 Budget notes that trade tensions are the most significant challenge that negatively impacted international trade and increased volatility of global markets. Summary of revenues and expenditures and budgeted indebtedness. The following table sets forth the actual revenues, expenditure and overall surplus/deficit, indebtedness and reserves of the Government for the fiscal years ended 30 December 2018, 2017, 2016, 2015 and 2014, respectively, as well as the estimated revenues, 9
10. expenditure and overall surplus /deficit of the Government for the fiscal year ended 30 December 2019 and the Government budget for the fiscal year ending 30 December 2020. Total Revenues ................... Fiscal year ended 30 December 2018 2017 2020 2019 2019 Budget Estimates(1) Budget 2016 Actual Actual (SAR millions, except percentages) 2015 Actual Actual 833,065 513,000 916,528 601,988 975,283 661,875 905,609 611,239 691,505 435,900 519,488 333,699 612,693 446,432 320,065 314,540 313,408 294,370 255,605 185,749 166,261 16,374 —-- 16,048 —-(3) 15,765 1,431 16,523 —- 14,017 —- 14,655 — 14,597 — 141,741 140,550 132,030 114,988 37,819 24,929 31,506 16,323 16,990 16,828 16,160 20,118 25,862 21,572 —Other taxes ...... 25,798 ——Grants ............. —Other non-oil revenue ............ 119,829 Total Expenditures ............ 1,020,085 29,138 — (4) 17,374 1,000 20,537 — — 15,448 16,541 — 14,132 — 111,813 128,980 126,172 168,203 103,762 84,454 (2) 1,001,292 210,313 Total oil revenue Total non-oil revenue ............................ —Taxes on income, profits and capital gains ................ —Taxes on property —Taxes on goods and services............ —Taxes on international trade and transactions 1,048,013 1,106,000 1,079,466 929,997 173,011 172,600 246,040 188,320 207,793 134,155 Current Expenditures ........... 846,970 Surplus/(deficit) ................... (187,020) Nominal GDP ...................... n.a Ratio of surplus/(deficit) to nominal GDP (%) ................ (6.4) Indebtedness outstanding at the end of period .............................. 754,000 Ratio of debt to GDP (%) ....................................... 26 876,513 859,960 891,146 722,204 696,358 790,979 (131,211) (130,659) ((173,86)) (238,488) (311,065) (365,445) n.a n.a 2,938,000 2,564,352 2,418,508 2,453,512 (4.7) (4.2) (4.6) (9.3) (12.9) (14.9) 678,000 678,000 560,000 443,300 316,600 142,200 24 22 19 17 13 6 579,185 683,296 1,023,304 467,000 496,000 490,000 Capital Expenditures ............ Government Reserves .......... 346,000 830,513 Source: SAMA, Ministry of Finance Notes: (1) (2) (3) (4) Preliminary figures. This figure excludes an expenditure amount of SAR 105.0 billion (U.S.$28.0 billion) relating to settling due payments from prior years. In 2019, Taxes on property were reclassified as Other taxes. In 2019, Grants were reclassified as Other non-oil revenue. 10
11. Recent Developments to “Indebtedness” (The following language is hereby included at the end of the section entitled “Indebtedness” starting on page 223 of the Base Prospectus) As at 30 November 2019, Saudi Arabia’s total outstanding direct indebtedness amounted to SAR 673.7 billion (U.S.$179.7 billion), comprising SAR 368.5 billion (U.S.$98.3 billion) of domestic indebtedness and SAR 305.2 billion (U.S.$81.4 billion) of external indebtedness. The following table sets forth Saudi Arabia’s total outstanding direct indebtedness (external and domestic) as at, and for the eleven months ending 30 November 2019 and as at, and for the years ending 31 December 2018, 2017, 2016, 2015 and 2014, respectively. As at, and for the eleven months ended 30 November 2019 As at, and for the year ended 31 December 2018 2017 2016 (SAR billions, except percentages) 2015 2014 Borrowed during period .................................. 114.9 120.0 139.1 200.1 98.0 — Repaid during period ...................................... 1.2 3.3 12.4 25.8 — 15.9 673.7 20.3 560.0 443.3 316.6 142.2 44.3 Change (%) ..................................................... 26.3 40.0 122.5 221.4 (26.4) GDP at current prices ...................................... — 2,934.3 2,582.2 2,418.5 2,453.5 2,836.3 Ratio of public debt to nominal GDP (%) ....... — 19.1 17.2 13.1 5.8 1.6 Indebtedness outstanding at end of period ............................................................. Source: Ministry of Finance, GASTAT Notes: (1) Represents nominal GDP for the year ended 31 December 2018. The following table sets forth Saudi Arabia’s scheduled principal and interest/profit payments for the one month period ending 31 December 2019 and each of the years ending 31 December 2020, 2021, 2022 and 2023, based on Saudi Arabia’s outstanding direct indebtedness as at 31 December 2018. One month ended 31 December 2019 Year ended 31 December 2020 2021 2022 2023 (SAR billions) External indebtedness: Scheduled principal repayments(1).................................................... — — 20.6 16.9 Scheduled interest/profit payments(2) ............................................... — 11.2 11.1 10.4 8.9 Total external scheduled payments .............................................. — 11.2 31.7 27.3 80.2 Scheduled principal repayments(3).................................................... 0.9 44.4 5.3 57.4 35.8 Scheduled interest/profit payments(4) ............................................... 0.8 12 11.1 11 9.5 Total domestic scheduled payments ............................................. 1.7 56.4 16.4 68.4 45.3 Total scheduled payments ............................................................. 1.7 67.6 48.1 95.7 125.5 71.3 Domestic indebtedness: __________________ Source: Ministry of Finance Notes: (1) (2) External principal repayments due in 2023 comprise SAR 11.25 billion (U.S.$3.0 billion) in respect of trust certificates issued under the Programme and a U.S.$16 billion (SAR 60.0 billion) five-year term loan facility carrying a floating interest rate. The Government’s external indebtedness comprises a U.S.$16 billion five-year term loan facility carrying a floating interest rate, SAR 194.5 billion (U.S.$51.9 billion) in respect of thirteen series of notes issued under the GMTN Programme, in each case carrying fixed interest rates and SAR 50.1 billion (U.S.$13.8 billion) in respect of four series of trust certificates issued under this Programme, in each case carrying fixed profit rates. The projections in respect of the floating rate are estimates and actual payments may differ from the amounts shown. 11
12. (3) (4) The domestic bonds issued by the Government during 2015, 2016, 2017, 2018 and 2019 comprise instruments with varying tenors of five years, seven years, ten years, twelve years, fifteen years and thirty years. The instruments issued in 2015, 2016, 2017, 2018 and 2019 with a five-year tenor are scheduled to mature in 2020, 2021, 2022, 2023 and 2024, respectively. The Government’s domestic indebtedness comprises both fixed rate and floating rate instruments. The projections in respect of the floating rate portion are estimates and actual payments may differ from the amounts shown. Recent Developments to “Economy of Saudi Arabia” (The following language is hereby included at the end of the section entitled “Economy of Saudi Arabia – Oil and Gas – Saudi Aramco” starting on page 157 of the Base Prospectus) On 11 December 2019, Saudi Aramco completed an initial public offering and listing on the Tadawul of SAR 96.0 billion (U.S.$25.6 billion) through a sale of a 1.5% stake held by the Kingdom in Saudi Aramco. The initial public offering highlights the Kingdom’s commitment to achieving the goals of Vision 2030 by diversifying sources of income and further enhancing the position of the domestic financial market. The proceeds of the offering, net of expenses incurred, were transferred to the PIF. Recent Developments to “Economy of Saudi Arabia” (The following language is hereby included at the end of the section entitled “Economy of Saudi Arabia – Oil and Gas – Production” starting on page 159 of the Base Prospectus) On 4 December 2019, the OPEC member states and certain non-OPEC states agreed to reduce crude oil production by an additional 500,000 barrels a day through the end of March 2020 amounting to a total reduction of 1.7 million barrels a day, effective as of 1 January 2020. The additional contributions from OPEC members and the additional voluntary contributions from non-OPEC participating countries to the production cut corresponded to 340,000 barrels a day and 160,000 barrels a day, respectively. In addition to these cuts, the Kingdom pledged a voluntary reduction of 400,000 barrels a day. Updates to the Base Prospectus The section of the Base Prospectus entitled “United States Federal Income Taxation” starting on page 238 shall be updated as per the following: (a) the first paragraph on page 240 of the Base Prospectus beginning with “This summary is based on the Code, administrative pronouncements” shall be deleted and replaced with the following: “This summary is based on the U.S. Internal Revenue Code of 1986, as amended (“Code”), administrative pronouncements, judicial decisions and final, temporary and proposed U.S. Treasury Regulations, changes to any of which subsequent to the date of this Base Prospectus may affect the tax consequences described below. This summary does not address any U.S. federal tax consequences other than U.S. federal income tax consequences, such as the estate tax, gift tax, alternative minimum tax consequences, or the medicare tax on net investment income. Moreover, this summary deals only with Trust Certificates with a term of 30 years or less. Persons considering the purchase of a particular Tranche of Trust Certificates should consult the relevant supplement to the Base Prospectus (if any) issued in connection with that Tranche of Trust Certificates for any discussion regarding U.S. federal income taxation and should consult their tax advisors with regard to the application of the U.S. federal income tax laws to their particular situations, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.”; (b) the fourth paragraph on page 240 of the Base Prospectus beginning with “The term “Non-U.S. Holder” means” shall be deleted and replaced with the following: “The term “Non-U.S. Holder” means a beneficial owner of Trust Certificates that is not a United States holder.”; (c) the following paragraph shall be added after the last paragraph on page 240 of the Base Prospectus: 12
13. “Under recently enacted legislation, U.S. Holders that use an accrual method of accounting for tax purposes may be required to accrue income earlier than would be the case under the general tax rules described above. However, recently released proposed regulations generally would exclude, among other items, original issue discount (“OID”) (whether or not de minimis) from the applicability of this rule. Although the proposed regulations generally will not be effective until taxable years beginning after the date on which they are issued in final form, taxpayers generally are permitted to rely on them currently. U.S. Holders that use an accrual method of accounting should consult with their tax advisors regarding the potential application of this legislation to their particular situation.”; (d) the first sentence of first paragraph on page 242 of the Base Prospectus under the sub-section “Original Issue Discount” beginning with “Except in the case of a short-term Trust Certificate” shall be deleted and replaced with the following: “Except in the case of a short-term Trust Certificate, a Trust Certificate that has an “issue price” that is less than its “stated redemption price at maturity” will be considered to have been issued with OID for U.S. federal income tax purposes (and will be referred to as an “original issue discount Trust Certificate”) unless the Trust Certificate satisfies a de minimis threshold (as described below).”; (e) the last paragraph on page 244 of the Base Prospectus under the sub-section “Original Issue Discount” beginning with “For taxable years beginning after December 31, 2018, a U.S Holder” shall be deleted; (f) the fourth paragraph on page 247 of the Base Prospectus under the sub-section “Foreign Currency Trust Certificates” beginning with “An accrual method U.S. Holder will be required to include in income” shall be deleted and replaced with the following: “An accrual method U.S. Holder will be required to include in income the U.S. dollar value of the amount of interest income (including OID, but reduced by amortisable bond premium, to the extent applicable) that has accrued and is otherwise required to be taken into account with respect to a foreign currency Trust Certificate during an accrual period. The U.S. dollar value of the accrued income will be determined by translating the income at the average rate of exchange for the accrual period or, with respect to an accrual period that spans two taxable years, at the average rate for the partial period within the taxable year. The U.S. Holder may recognise ordinary income or loss with respect to accrued interest income on the date the income is actually received. The amount of any ordinary income or loss recognised will equal the difference between the U.S. dollar value of the foreign currency payment received (determined on the date the payment is received) in respect of the accrual period (or, where a U.S. Holder receives U.S. dollars, the amount of the payment in respect of the accrual period) and the U.S. dollar value of interest income that has accrued during the accrual period (as determined above). Rules similar to these rules apply in the case of a cash method taxpayer required to currently accrue OID.”; and (g) the first paragraph on page 250 of the Base Prospectus under the sub-section “Other Reporting Requirements” beginning with “Certain U.S. Holders are required to report information relating to” shall be deleted and replaced with the following: “Certain U.S. Holders are required to report information relating to certain specified foreign financial assets, including an interest in the Trust Certificate, subject to certain exceptions (including an exception for Trust Certificate held in accounts maintained by certain financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of the Trust Certificate.” General Information Since the date of the Base Prospectus, there has been no significant change in the information set out under the following headings in the Base Prospectus (as supplemented by this Supplement): “The Economy of 13
14. Saudi Arabia ”, “Monetary and Financial System”, “Public Finance” “Indebtedness” and “Balance of Payments and Foreign Trade”. To the extent that there is any inconsistency between (a) any statement in this Supplement and (b) any other statement in or incorporated by reference in the Base Prospectus, the statements in (a) above will prevail. Save as disclosed in this Supplement, there has been no other significant new factor, material mistake or material inaccuracy relating to information included in the Base Prospectus since the publication of the Base Prospectus. 14