Saudi Arabia is looking for $6-8 billion in bank loans to keep its public finances afloat

It first emerged that Saudi Arabia was looking to borrow money to shore up its public finances last week

Many states are expected to increase their borrowing sharply if oil prices stay low (Reuters)

Saudi Arabia is reportedly seeking a bank loan of $6 to $8 billion is what would be the first significant borrowing by the kingdom's government for more than a decade.

It emerged that Saudi Arabia was looking to borrow money to shore up its public finances last week.

The kingdom has asked banks to submit proposals to lend it a five-year dollar loan of between $6 and $8 billion, Reuters reported, citing sources close to the matter.

Saudi has also asked for the option to increase the loan from this initial limit, as it looks to plug a record budget deficit of £100 billion in 2015 alone.

The kingdom is selling off foreign assets and issuing domestic bonds to try and shrink that deficit that has opened up since oil prices have slumped from over $100 a barrel in 2014 to around $30 a barrel today.

Saudi Arabia has already raised domestic petrol prices by up to 40 per cent and set about dismantling generous subsidies for water, electricity and petrol. The kingdom has traditionally kept prices low for residents as a social welfare measure.

Changes to VAT and an increase in taxes on soft drinks and tobacco are also planned.

Before the oil price started falling in mid-2014, Saudi Arabia, like many other oil-reliant Gulf states, paid down Government debt and borrowed little from international banks.

Many states are expected to increase their borrowing sharply if oil prices stay low.

Qatar borrowed $5.5 billion in January, around the same time the government of Oman borrowed $1 billion through an international loan.

Saudi Arabia's £100 billion budget deficit is still one of the lowest in the world, which could make lending to the kingdom an attractive prospect for investors. The pricing of the loan is expected to be measured against the earlier loans to Qatar and Oman, which took a long time to arrange because of concerns about the Gulf region's ability to cope with the era of cheap oil, Reuters said.