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The oil-exporting countries of the Persian Gulf, from Qatar to Saudi Arabia, are turning to the public to sell debt as shrinking oil revenues erode their budgets.

Qatar, which owns some of the world's largest gas reserves, this week plans to sell about $5 billion worth of bonds in multiyear tranches, the latest Gulf state to tap the international capital markets for fresh funds in an attempt to shore up government finances crippled by low energy prices.

Qatar's return to the markets follows the example of the United Arab Emirates and Bahrain which earlier this year sold around $6 billion worth of bonds. Saudi Arabia is also preparing to tap the international bond markets later this year, banking sources have said. It already secured a $10 billion bank loan with the help of international lenders earlier this year.

The six-member Gulf Cooperation Council states—namely Saudi Arabia, the U.A.E., Qatar, Kuwait, Bahrain and Oman—have mostly relied on income from oil and gas sales to grow their economies. Now, with oil prices tumbling as far as below $30 at the start of the year, budget deficits are widening.

The GCC states this year are expected to post a deficit of between $120 billion and $150 billion depending on the price of oil, said Anita Yadav, head of fixed income research at Dubai-based bank Emirates NBD.

The International Monetary Fund said earlier this year that if oil prices remained low, the Gulf nations faced a combined deficit of nearly a $1 trillion in the next five years. Saudi Arabia, the Middle East's biggest economy, will need to find ways to finance a $324 billion deficit, ratings agency Moody's recently said.

Besides issuing bonds and tapping their reserves, Gulf countries are resorting to a raft of measures to ease the pain of lower oil prices. Saudi Arabia, for example, is overhauling its economy to bring to an end the country's dependence on oil. Others like the U.A.E. or Kuwait have raised taxes and fees, while some have also cut subsidies.

The timing of Qatar's issuance isn't entirely a surprise, bankers and fund managers said. There has been a flurry of debt sales in recent weeks, as issuers want to wrap up their financing plans ahead of the start of the Muslim holy month called Ramadan, set to start around June 6 this year and often a slow time for deal activity in the region.

Recent issuers include state-linked entities such as Abu Dhabi sovereign fund Mubadala, the emirate's flagship carrier Etihad and Dubai's ports operator DP World.

Qatar's issuance comes despite several ratings downgrades earlier this year. Moody's earlier this month cut its credit ratings of Saudi Arabia, Oman and Bahrain. Qatar wasn't downgraded but had its outlook changed to negative.

Middle Eastern governments have already sold $8.6 billion of internationally marketed bonds in 2016 prior to the Qatar issue, just shy of the total full-year issuance for 2015 of $8.9 billion, according to Dealogic.

In April, Abu Dhabi sold a total of $5 billion of debt spread across five-year and 10-year tranches, paying an interest rate of 2.1% and 3.1% respectively.

The Qatar bond could be $5 billion to $7 billion in size, depending on investor demand, said Aaron Grehan, a portfolio manager at Aviva Investors.

"Coming into this year it was expected to see issuance out of the Middle East to deal with the changing financial conditions as a result of lower oil prices," said Mr. Grehan, who said he was considering buying the Qatari bonds.

"Oil and commodity prices have a significant impact on the future credit outlook of the Middle East region," Mr. Grehan said.

Gulf governments are likely to borrow more in the near future, according to research firm Marmore, a subsidiary of Kuwait Financial Centre Markaz. It estimates Gulf governments will raise between $285 billion and $390 billion in debt through 2020 by issuing local and international debt and bonds. That compares with $72.1 billion raised between 2008 and 2014.

HSBC, J.P. Morgan Bank of Tokyo-Mitsubishi UFJ and QNB Capital are coordinating the Qatar bond sale, according to a term sheet of the deal and a fund manager.

Tasos Vossos in London contributed to this article.

Write to Nicolas Parasie at nicolas.parasie@wsj.com and Christopher Whittall at christopher.whittall@wsj.com

(END) Dow Jones Newswires

May 25, 2016 10:15 ET (14:15 GMT)

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