RIYADH: Global sukuk issuances are expected to decline in 2023 to come in between $150 billion and $160 billion, from $178 billion in 2022, driven by improving fiscal positions of sovereign issuers in the Gulf Cooperation Council region and Southeast Asia, according to Moody’s Investors Service.
A report from the firm noted the issuing of the Shariah-compliant bonds in the first half of 2023 declined by 28 percent to $66 billion, compared to $92 billion in the same period of the previous year.
This fall is due to muted activities in key countries including Saudi Arabia, Indonesia and Turkiye, amid robust commodity prices.
“In the GCC and Southeast Asia, robust commodity prices associated with sustained economic growth have translated into stronger fiscal positions and lower issuance needs,” said Moody’s in the report.
HIGHLIGHTS
The issuing of the Shariah-compliant bonds in the first half of 2023 declined by 28 percent to $66 billion, compared to $92 billion in the same period of the previous year.
Moody’s says it expects issuance of $80-$90 billion in the second half of the year, supported by a partial rebound in Southeast Asia and Turkiye.
The firm added that it expects issuance of $80- $90 billion in the second half of the year, supported by a partial rebound in Southeast Asia and Turkiye, as well as sustained strong volumes from corporates and financial institutions.
The report, however, noted that the long-term prospects of sukuk are positive as it provides an excellent alternative to conventional financing and is highly compatible with environmental, social and governance principles.
“New issuers and green agendas will buoy sukuk market growth in the coming years, supporting a long-term positive trend. Green sukuk issuance is gaining pace as sustainability becomes a key requirement for a number of public and private investors and governments, including oil-producing GCC countries, are putting sustainability at the heart of their development agendas,” added Moody’s.
The report further noted that Saudi Arabia will remain the largest issuer in the region, but government activity is likely to be limited to refinancing maturing sukuk.
Earlier this month, Ayman Al-Sayari, governor of the Saudi Central Bank, also known as SAMA, revealed that Saudi Arabia is the largest Islamic finance market in the world with total assets exceeding SR3.1 trillion.
The SAMA chief also added that the Kingdom is the largest sovereign sukuk issuer in the world.
In August, Saudi Arabia’s National Debt Management Center took a strategic step to restructure SR35.7 billion of debt instruments into four new sukuk tranches featuring longer-term maturities in 2024, 2025 and 2026.
This initiative aims to strengthen the domestic money market and keep up with its developments, a press release said.
