GCC sovereigns may need as much as $560bn to finance government deficits between 2015 and 2019, according to US-based Standard & Poor’s (S&P).

The financial services firm forecasts 60 per cent of this will be in Saudi Arabia, which is about to go ahead with a $10-15bn international bond issuance. S&P expects the kingdom to borrow as much as $180bn by 2019.

The deficits will be financed by a mix of drawdowns on assets and reserves, and domestic and international debt.

The combined fiscal deficit of the six countries is estimated to reach $160bn in 2016 alone, or 12.8 per cent of GDP.

Between 2016 and 2019, S&P expects Bahrain, Oman, Kuwait and Saudi Arabia to run an average fiscal deficit of 10 per cent a year, while Abu Dhabi and Qatar will see a 4 per cent deficit.

The fall in oil prices meant that GCC governments began to run serious deficits in 2015. Balance sheets have now begun to show significant deterioration. While Kuwait, Abu Dhabi, Qatar and Saudi Arabia have very large reserves, these are finite.

International and domestic liquidity is also falling. This could create uncertainty and push up the cost of borrowing for GCC sovereigns, continues S&P.

By 2019, the ratings agency expects Bahrain’s net debt to double, while Oman’s net assets will be at zero.

Saudi Arabia’s net asset position will decrease by 30 per cent and Kuwait’s by 20 per cent. Saudi Arabia has already used up $170bn of foreign reserves from the peak in August 2014 to reach $562bn by August 2016, according to the Saudi Arabian Monetary Agency.

GCC sovereigns will choose different mixes of asset and debt funding, with Qatar relying most on debt and Kuwait most on drawing down reserves.

The fiscal balance after 2019 depends on the speed of implementation of government reforms such as subsidy cuts and value added tax, and oil prices.