– The GCC region’s Debt Capital Market (DCM) has grown by 7% year-on-year, reaching $940 billion in outstanding debt by the end of Q1 2024, with significant contributions from Saudi Arabia (43%) and the UAE (30%).

– According to Fitch, 40% of the DCM outstanding consisted of sukuk by the end of the first quarter, with the remainder in bonds. Future government issuances are expected to be driven by lower oil prices, reduced interest rates, and initiatives to develop and diversify DCMs.

– Saudi Arabia is expanding its DCM with issuances driven by budget deficits, while the UAE continues to issue despite surpluses. Conversely, Qatar and Oman’s DCMs are contracting due to upcoming debt repayments in 2024. Kuwait’s funding options are limited by the absence of a debt law, and Bahrain relies on DCM access and GCC funding amid large deficits.

The GCC region’s Debt Capital Market (DCM) has increased by 7% year-on-year (YoY), reaching $940 billion in outstanding debt by the end of Q1 2024, with Saudi Arabia holding the largest share at 43%, followed by the UAE at 30%.

Fitch, which rates more than 70% of GCC US dollar sukuk, indicated that 40% of the DCM outstanding consisted of sukuk by the end of the first quarter, with the remainder in bonds.

Fitch also noted that government issuances are expected to be driven by anticipated lower oil prices, reduced interest rates, and initiatives to further develop the DCMs and diversify funding sources.

“GCC countries have made substantial progress in developing their DCMs, now accounting for nearly a third of total emerging-market dollar issuances, excluding China,” commented Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings.

Saudi Arabia is focusing on expanding its DCM with issuances fueled by budget deficits, while the UAE is projected to continue issuances even with budget surpluses. In contrast, DCMs in Qatar and Oman are shrinking as they prepare to repay more debt in 2024.

Al Natoor also pointed out that Kuwait’s funding options are limited due to the lack of a debt law, and noted that Bahrain depends heavily on DCM access and GCC funding to manage its significant deficits.