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 fiscal deficits. 

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 remain strong.