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Turkish Govt Shocks Citizens with Electricity Prices

A worker performs checks at Turkey's Mediterranean port of Ceyhan, which is run by state-owned Petroleum Pipeline Corporation (BOTAS), some 70 km (43.5 miles) from Adana, Turkey, February 19, 2014. REUTERS/Umit Bektas/File Photo
A worker performs checks at Turkey's Mediterranean port of Ceyhan, which is run by state-owned Petroleum Pipeline Corporation (BOTAS), some 70 km (43.5 miles) from Adana, Turkey, February 19, 2014. REUTERS/Umit Bektas/File Photo
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Turkish Govt Shocks Citizens with Electricity Prices

A worker performs checks at Turkey's Mediterranean port of Ceyhan, which is run by state-owned Petroleum Pipeline Corporation (BOTAS), some 70 km (43.5 miles) from Adana, Turkey, February 19, 2014. REUTERS/Umit Bektas/File Photo
A worker performs checks at Turkey's Mediterranean port of Ceyhan, which is run by state-owned Petroleum Pipeline Corporation (BOTAS), some 70 km (43.5 miles) from Adana, Turkey, February 19, 2014. REUTERS/Umit Bektas/File Photo

A new increase in electricity prices in Turkey for the second consecutive time in three months has enraged citizens.

The Turkish Energy Market Regulatory Authority (EPDK) announced Tuesday raising consumer electricity prices by 14.9 percent, knowing that the prices witnessed an equal raise in July.

After the new increase, users would pay starting October TRY71.22 (around USD14) for 100 kilowatt-hours. EPDK said, in a statement, that a key factor for increasing prices was the Electricity Distribution Co. changing its wholesale prices with the unit-cost of electricity inching up to 35 kurus.

The new move caused a withering criticism of the government on social media, with citizens expressing anger expressed anger at the power price rises which would increase burdens on Turkish households.

Earlier, the Organization for Economic Co-operation and Development issued a report pointing out that the electricity prices in Turkey rose by 307 percent since 2003, when the government of Justice and Development Party became in charge under Turkish President Recep Tayyip Erdogan.

Last August, the government imposed a new increase in natural gas prices for the fourth time in less than one year by 15 percent for houses and 14 percent for industrial usage.

Economists criticized the new roadmap to implement the economic program, adding that the three goals announced by Turkish Finance Minister Berat Albayrak are “unrealistic”.

Albayrak laid out on Monday Turkey's targets in the New Economic Program (NEP) covering the 2020-2022 period. He stated that they trimmed the inflation forecast for the end of this year to 12 percent, from the current year's predictions of 15.1 percent, and to 8.5 percent for 2020, 6 percent in 2021 and 4.9 percent in 2022.

"Growth in 2019 will be 0.5 percent…After closing 2019 with an unemployment rate of 12.9 percent, we aim to reduce the figure to 11.8 percent next year, 10.6 percent in 2021 and 9.8 percent in 2022," the minister said.

Economist Ugur Gurses commented on Albayrak’s roadmap, saying that he presented it to persuade his father-in-law (Erdogan) and not the people. The official target of growth is 5 percent by 2022 but the presented target for inflation is 12 percent for 2019, 8.5 percent, 6 percent and 4.9 percent for the three coming years respectively.

Former Turkish Central Bank Governor Durmus Yilmaz said that the budget deficit estimates in 2020-2022 of 2.9, 2.5, and 1.5 percent are based on taxes collection, which in their turn will be provided by an anticipated growth of 5 percent in the coming three years.

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Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
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Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).

Saudi Arabia has raised $12 billion from global debt markets in its first international bond issuance of the year, attracting bids worth nearly $37 billion. This demonstrates strong investor appetite for Saudi debt instruments.

The issuance comes just two days after the approval of the 2025 annual borrowing plan by Minister of Finance Mohammed Al-Jadaan. The plan estimates financing needs for the fiscal year at SAR 139 billion ($37 billion). The funds will be used to cover the projected SAR 101 billion ($26.8 billion) budget deficit for 2025, as well as repay SAR 38 billion ($10 billion) in principal debt obligations due this year.

The National Debt Management Center (NDMC) announced on Tuesday that the issuance includes three tranches: $5 billion in three-year bonds, $3 billion in six-year bonds, and $4 billion in ten-year bonds. Total demand for the bonds reached $37 billion, exceeding the issuance size by three times and reflecting robust investor interest.

The NDMC emphasized that this issuance aligns with its strategy to broaden the investor base and efficiently meet Saudi Arabia’s financing needs in global debt markets.

According to IFR, a fixed-income news service, the initial price guidance for the three-year bonds was set at 120 basis points above US Treasury yields. The six-year and ten-year bonds were priced at 130 and 140 basis points above the same benchmark, respectively.

Strong demand allowed Saudi Arabia to lower yields on the shorter-term bonds, further demonstrating investor confidence. Economists noted that the pricing above US Treasuries is attractive in the current market, showcasing trust in Saudi Arabia’s economic stability and financial strategies.

International confidence

Economic experts view this successful bond issuance as a testament to international confidence in Saudi Arabia’s robust economy and financial reforms. Dr. Mohammed Al-Qahtani, an economics professor at King Faisal University, said the move underscores Saudi Arabia’s commitment to diversifying financing tools both domestically and internationally. He added that the funds would support Vision 2030 projects, reduce pressure on domestic resources, and attract strong international investor interest.

The issuance strengthens Saudi Arabia’s ability to meet financial needs, expand its investor base, and establish a global financing network, he said, noting that it also facilitates entry into new markets, enabling the Kingdom to accelerate infrastructure projects and capital expenditures.

Dr. Ihsan Buhulaiga, founder of Joatha Business Development Consultants, described the 2025 budget as expansionary, aimed at meeting the financing needs of economic diversification programs. He stressed that the budget deficit is an “optional” one, reflecting a deliberate choice to prioritize Vision 2030 initiatives over immediate fiscal balance.

Buhulaiga explained that the Kingdom’s approach balances two options: limiting spending to available revenues, which would avoid deficits but delay Vision 2030 initiatives, or borrowing strategically to fund Vision 2030 goals. He said that the annual budget is just a component of the larger vision, which requires sustained funding until 2030.

He continued that Saudi Arabia’s fiscal space and creditworthiness allow it to borrow internationally at competitive rates, explaining that this flexibility ensures financial sustainability without compromising stability, even during challenges like the COVID-19 pandemic.

Saudi Arabia’s debt portfolio remains balanced, with two-thirds of its debt domestic and one-third external. As of Q3 2024, public debt stood at approximately SAR 1.2 trillion, below the 30% GDP ceiling. According to the Ministry of Finance, the budget deficit is expected to persist through 2027 but remain below 3% of GDP.

Buhulaiga highlighted the importance of capital expenditure, which reached SAR 186 billion in 2023 and is projected to rise to SAR 198 billion in 2024, a 6.5% increase.

He emphasized the government’s pivotal role in economic diversification, supported by investments from the Public Investment Fund (PIF), the National Development Fund, and its subsidiaries, including the Infrastructure Fund.

The PIF recently announced a $7 billion Murabaha credit facility, facilitated by Citigroup, Goldman Sachs International, and JPMorgan. Meanwhile, the NDMC arranged a $2.5 billion revolving credit facility earlier in January, compliant with Islamic principles, to address budgetary needs.

In November, Moody’s upgraded Saudi Arabia’s credit rating to Aa3, aligning with Fitch’s A+ rating, both with a stable outlook. S&P Global assigns the Kingdom an AA-1 rating with a positive outlook, reflecting a high ability to meet financial obligations with low credit risk.

The IMF estimates Saudi Arabia’s public debt-to-GDP ratio at 26.2% in 2024, describing it as low and sustainable. This is projected to rise to 35% by 2029 as foreign borrowing continues to play a key role in financing deficits.