Arab News, Thursday, Mar 09, 2023 | Sha'ban 17, 1444
Long-term sovereign sukuk issuance will settle at $80bn: Moody’s
Saudi Arabia:Improved fiscal
positions of energy-exporting issuers like Saudi Arabia will help stabilize
long-term sovereign sukuk issuance at around $80 billion in 2023 and $80-$85
billion in 2024, according to credit rating agency Moody’s Investors Service.
Supporting but lower hydrocarbon prices will
continue to boost fiscal balances of energy-exporting sovereign sukuk issuers,
with the majority of Gulf Cooperation Council region countries recording budget
surpluses in 2023-2024.
“Consequently, GCC issuance in 2023 will be mainly
driven by governments' decisions to refinance or repay maturing sukuk using
surplus funds,” said Alexander Perjessy, vice president and senior credit
officer at Moody’s.
“We expect lower gross issuance from GCC to be
broadly offset by higher volumes elsewhere, particularly in Indonesia, where
domestic sukuk issuance dipped significantly last year,” he continued.
Adding that after six years of Saudi Arabia
accounting for the highest single share of long-term sovereign sukuk issuances,
the credit rating agency expects Malaysia and Indonesia to make the largest
contribution, reflecting larger sukuk refinancing needs, if marginally improving
It also said that recently announced new
government sukuk initiatives by the Kingdom and Egypt, provide a minor upside
risk to their sukuk issuance forecasts. Furthermore, Saudi Arabia aims to
introduce a domestic sukuk savings program for ordinary retail investors.
However, a prolonged post-pandemic recovery was
the primary driver of Southeast Asia's fiscal improvement last year,
particularly in Indonesia, which posted the single highest reduction in gross
sovereign sukuk issuance in 2022.
In Saudi Arabia, sovereign sukuk issuance volumes
fell 4 percent to $29.8 billion in 2022, with the vast majority – excluding $2.5
billion of dollar-denominated foreign sukuk – issued in the domestic market
under the established regular issuance schedule.
“Last year's issuance was significantly higher
than what we had expected at the start of 2022. This is because the government
opted to pre-fund some 2023 maturities in 2022 and conduct a liability
management exercise by issuing sukuk, both of which we estimate added around $16
billion to Saudi Arabia's gross sovereign sukuk issuance,” Moody’s said.
According to Moody’s, Saudi Arabia is expected to
achieve a budget surplus of 0.8 percent of the gross domestic product in 2023, a
relatively slight decrease from a surplus of 2.6 percent of the GDP in 2022,
driven by continued strong hydrocarbon revenue.
Moody’s also affirmed Saudi’s A1 credit rating
with a stable outlook, mainly driven by the government’s fiscal policy
effectiveness adding that the Kingdom’s non-oil private sector activity will