Fitch: Sukuk and bond issuances in GCC hit nearly a trillion dollars

The debt capital market issuances in the Gulf countries are expected to continue to rise during 2024 and 2025, according to a new report from Fitch Ratings, and are gradually approaching the $1 trillion barrier of outstanding debt.

The Gulf debt market recorded a growth of 7% year-on-year, reaching $940 billion of outstanding debt by the end of the first quarter of 2024, with Saudi Arabia accounting for the largest share of total Gulf debt issuances at 43%, followed by the UAE at 30%, and nearly 40% of the debt outstanding in the Gulf debt capital markets were sukuks by the end of the first quarter of 2024, with the rest in bonds.

Fitch said that the volume of debt issuance in the Gulf countries is approximately one-third of the total dollar issuance in emerging markets, excluding China, and most Gulf countries have come a long way in developing debt capital markets. However, debt capital markets in the Gulf are at different stages of maturity, and less developed than in more developed regions. The corporate finance culture is oriented towards bank loans, and banks rely on deposit financing. Broader and more diverse participation from issuers and investors will support development. Saudi Arabia aims to deepen its debt capital market with issuances to finance projects and cover the budget deficit. The report expects the UAE to continue issuing sukuk and bonds, while debt capital markets in Qatar and Oman are shrinking as these governments continue to repay more debt through 2024. In Kuwait, the absence of a debt law limits financing options, while Bahrain relies on access to debt capital markets and Gulf financing in light of its large deficit.