Riyadh has invited banks to submit proposals to extend it a $6bn-$8bn loan, in the kingdom’s first bid to tap international debt market for more than a decade.

As part of efforts to plug its budget deficit, the government is mulling plans to secure a five-year US-dollar loan, with an option to increase it, according to news agency Reuters, which cited unnamed sources. Saudi Arabia’s Finance Ministry and Central Bank could not be reached for comment.

It was reported that the government was seeking advice for an international loan, which could total about $10bn.

The kingdom, which expects a SR326bn ($87bn) budget deficit in 2016, has embarked on spending cuts to compensate for shrinking oil revenues. The SR444.5bn oil proceeds in 2015, represented 73 per cent of the kingdom’s total revenues. This is 23 per cent less than the income generated from the sale of crude a year earlier.

The kingdom has resorted to drawing down on the foreign reserves and tapping the Saudi banks and financial institutions with local currency bonds, which has started to strain liquidity in the banking system.

London-based boutique advisory firm Verus Partners, set up by former Citigroup bankers Mark Aplin and Andrew Elliot, is advising the Saudi government on the loan.

The firm has sent requests for proposals to a small group of banks on behalf of the Saudi Ministry of Finance. Banks participating in the loan would have a better chance of being chosen to arrange an international bond issue that Saudi Arabia may conduct as soon as this year, according to Reuters.

Sovereign borrowing by the six wealthy Gulf Arab oil exporters could total $20bn or more in 2016. All six members of the GCC have either launched borrowing programmes or are laying plans to compensate for the low oil prices.

In mid-February, Standard & Poor’s (S&P) cut Saudi Arabia’s long-term sovereign credit rating by two notches to A-. Moody’s Investors Service put Saudi Arabia on review for a possible downgrade.

The pricing of the loan is likely to be benchmarked against international loans taken out by the governments of Qatar and Oman in the past few months.