The oil-rich region witnessed a record rise in international bonds for the second year in a row, exceeding $ 100 billion, as borrowers’ financial conditions were affected by the Covid-19 pandemic and low oil prices, while a few issues are still expected before the end of the year.
Khalid Rashid, head of MENA debt capital markets at Deutsche Bank, said, “I think in general the market will grow. We can easily add between 7 and 10 billion additional dollars to the total issuance in 2020.”
Standard & Poor’s Global Credit Ratings said in July that the budgets of GCC governments were expected to continue deteriorating into 2023.
Kuwait has not issued dollar bonds since 2017, but it may return to the market next year according to a new debt law that will allow the collection of more funds from abroad and help the country overcome the lack of liquidity.
James Reeve, chief economist at Samba Financial Group, estimates the financial requirements of Saudi Arabia in the coming year at about $ 60 billion, with about $ 18 billion being covered by international bonds.
There are more issuances expected from Dubai, which in September returned to the debt market for the first time in six years. Bankers expect another $ 2 billion to be issued next year, as important sectors of the economy still face pressure.
For Bahrain and Oman, which are below the investment grade, issuing debt instruments is very important to offset dwindling foreign reserves, but Oman may need direct support from its Gulf neighbors, as investors are increasingly concerned about its deteriorating credit position.
Hasnain Malik, head of equity research at Tellimer, said he expects more mergers between government-related companies, which will eliminate cost duplication and “build up debt for stronger business patterns that are likely to result from this merger.”
One banker said the Abu Dhabi National Oil Company (ADNOC) could be a newcomer in the debt market. The company received a credit rating last year. ADNOC did not respond to a request for comment.