Debt markets in UAE and Saudi Arabia hit $630bn

WAM

• More growth due in 2024
• UAE sukuk issuance doubles
• Saudi sukuk totals $50bn

Debt capital markets in the GCC’s two biggest economies, the UAE and Saudi Arabia, are expected to grow again this year after double digit expansion in 2023 saw their combined total reach $630 billion.

Fitch Ratings said Saudi Arabia-based corporates are expected to issue more debt this year after a 14.5 percent rise in the market in 2023.

The UAE is planning to issue bonds and sukuk valued at AED5 billion ($1.36 billion) in the first quarter of this year, Younis Haji Al Khoori, undersecretary at the country’s Ministry of Finance, announced in Hong Kong on Wednesday.

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Sukuk were developed as an alternative to conventional bonds that are not considered permissible by many Muslims as they pay interest and may finance businesses involved in activities not allowed under sharia.

Al Khoori said the UAE issued bonds and sukuk totalling AED7.7 billion last year. 

The Saudi debt market stood at $360 billion at the end of December, while the UAE debt market saw 10 percent growth last year to $270 billion.

Fitch forecast that the UAE would issue another $30 billion in debt this year, to reach a total of $300 billion by 2025, while the debt market in Saudi Arabia is predicted to reach $500 billion in the medium term.

The UAE has the largest US dollar debt market in the GCC, with Nasdaq Dubai being one of the top listing centres globally for US dollar sukuk.

Fitch expects the share of sukuk and dirham issuances in the UAE’s debt market mix to rise after the government’s implementation of the Dirham Monetary Framework.

The UAE government started issuing dirham treasury bonds in 2022, and treasury sukuk were issued in dirham after mid-2023. 

The UAE’s sukuk issuance in all currencies more than doubled to $12.7 billion in 2023, while bond issuance rose by a quarter to nearly $133 billion. 

Sukuk issuance in Saudi Arabia was $33.6 billion in 2023, down 20 percent, while bond issuance doubled to $22.8 billion. It has the largest sukuk market in the GCC, making up 69 percent of the regional market.

The kingdom sold bonds worth $12 billion earlier this month in a three-part issuance that was heavily oversubscribed. In December the finance ministry concluded an $11 billion syndicated loan that was 2023’s largest worldwide. 

Fitch said rated outstanding sukuk in Saudi Arabia totalled $50 billion at the end of 2023, 97.3 percent of which was investment grade, and all sukuk issuers had stable outlooks with no defaults.

In the UAE, 96.5 percent of the sukuk is investment grade.