Saudi Arabia is spearheading the Gulf Cooperation Council (GCC) in global sukuk issuances, with volumes expected to surpass those of 2023, according to a recent report by Moody’s. The report highlights that global sukuk issuance volumes in 2024 are projected to range between $200 and $210 billion, up from just under $200 billion in 2023. This surge is driven by the region’s efforts to diversify their economies and reduce reliance on oil revenues, with Saudi Arabia playing a pivotal role.
Saudi Arabia has emerged as a leader in sukuk issuance within the GCC, accounting for a significant portion of the region’s total. In the first half of 2024, GCC sukuk issuance rose by 138% year-on-year to $69.2 billion, with Saudi Arabia contributing 37% of this total. This impressive growth is attributed to the kingdom’s strategic initiatives aimed at economic diversification and financial stability.
The Saudi government has been proactive in refinancing its debt maturities, issuing $17 billion of new longer-dated sukuk in the first half of the year. This move is part of a broader strategy to manage the kingdom’s debt profile and ensure sustainable economic growth. The increased issuance of sukuk also reflects the growing demand for Sharia-compliant financial instruments, which are becoming increasingly popular among investors.
Moreover, the kingdom’s focus on environmental, social, and governance (ESG) criteria has led to a rise in ESG sukuk issuances. In the first half of 2024, ESG sukuk volumes reached $6 billion, driven by strong investor demand and the kingdom’s commitment to sustainable development.
Impact on the GCC and Global Markets
The surge in sukuk issuances by Saudi Arabia and other GCC countries is having a significant impact on both regional and global markets. The increased issuance activity is enhancing liquidity in the sukuk market, providing investors with more opportunities to diversify their portfolios. This is particularly important for investors seeking Sharia-compliant investment options, which offer a unique blend of ethical and financial benefits.
The GCC’s dominance in the sukuk market is also attracting international attention, with global investors showing increased interest in the region’s financial instruments. This is helping to boost the GCC’s profile as a key player in the global financial landscape. The strong performance of the sukuk market is also contributing to the overall stability and resilience of the region’s economies, which are undergoing significant transformations as part of their long-term development plans.
In addition to benefiting the GCC, the growth in sukuk issuances is also supporting the broader Islamic finance industry. The increased issuance volumes are helping to deepen the market, making it more attractive to a wider range of investors. This is expected to drive further growth in the industry, which is already experiencing rapid expansion due to rising demand for Sharia-compliant financial products.
Future Prospects and Challenges
Looking ahead, the outlook for sukuk issuances in the GCC remains positive, with Saudi Arabia expected to continue playing a leading role. The kingdom’s commitment to economic diversification and sustainable development is likely to drive further growth in the sukuk market. However, there are also challenges that need to be addressed to ensure the continued success of the market.
One of the key challenges is the need for greater standardization and harmonization of sukuk structures. This is essential to enhance the market’s efficiency and attract more international investors. Efforts are already underway to address this issue, with various initiatives aimed at developing common standards and best practices for sukuk issuance.
Another challenge is the need to expand the investor base for sukuk. While demand for Sharia-compliant financial instruments is growing, there is still a need to raise awareness and educate investors about the benefits of sukuk. This will require concerted efforts from both issuers and regulators to promote the sukuk market and attract a broader range of investors.
Despite these challenges, the future of the sukuk market in the GCC looks promising. With Saudi Arabia leading the way, the region is well-positioned to capitalize on the growing demand for Sharia-compliant financial products and continue its journey towards economic diversification and sustainable development.
