Moody’s, the credit rating agency, said that Gulf countries’ sukuk issuances fell in the first half of 2021 by 19% on an annual basis to $35.3 billion, due to the rise in oil prices.
In its report, Moody’s pointed to the significant decline in sovereign issuances, which was only offset by an increase in the volume of corporate issuances.
According to the report, Saudi Arabia remained the largest exporter in the Gulf at 62%, or $22 billion of the total volume, down from $24.5 billion in the first half of 2020, according to the Kuwaiti newspaper, Al-Rai.
The Saudi government controlled the issuances, but its share of them decreased to 58% in the first half of 2021, compared to 88% in the first half of 2020.
The contribution of Saudi companies and banks increased to 30%, backed by an initial issuance of $6 billion by Aramco.
Moody’s confirmed that Saudi Arabia will remain the largest Gulf issuer, pointing out that all local issuances by the Saudi government since July 2017 are in the form of sukuk, while the government is working to increase the share of domestic borrowing in the total financing mix.
The agency stated that Kuwait was the second largest issuer of sukuk in the Gulf states in the first half of this year, by issuing $7.2 billion, an increase of 11% on an annual basis, mainly due to the issuance of banks.
She added that Kuwait will also be a major player, mainly supported by short-term issuances by the Central Bank and long-term issuances by commercial banks, while the agency expected, in return, that issuance activity would remain subdued in other Gulf countries.
Sukuk issuances in the UAE and Bahrain declined by 65% from $11.6 billion a year ago to $4 billion in the first half of this year, due to weak government activities.
In terms of sectoral segmentation, the agency expected Islamic financing sukuk issuance to remain flat or slow this year after achieving 5 years of strong growth, as high oil prices reduced sovereign financing needs in the Gulf countries.
Moody’s expects that Gulf sovereign issuances will be lower than they were in the same period last year, due to the decrease in the fiscal deficit as a result of high oil prices.