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Sunday, 7 August 2016

GCC sovereign bond issuance on the rise |

GCC sovereign bond issuance on the rise |

"The prolonged period of low oil prices has put a strain on government budgets across the region, exposing the dependence that GCC economies have on oil revenues. This development over the past 18 months indicates that there are challenging times ahead for GCC countries. To address that there is an urgent need to transition from the over reliance on income from crude oil to a more diversified economic model.

Consequently, this period has encouraged GCC governments to accelerate initiatives to implement economic reforms and exercise greater budgetary discipline. Moreover, the current climate has channelled GCC issuers tap into the bond market to address the growing requirement for additional funds. Although fiscal and economic reforms are lengthy processes, GCC markets have seen a significant surge in bond and sukuk issuances over the past year. Indicative signs of what lies ahead was visible during the first six months of 2016 (first half of 2016), when GCC bond issuances totalled approximately $39 billion (Dh143 billion) (including Sukuks) — almost 15 per cent of the total outstanding amount of bonds as of June 30, 2016. It is interesting to note that the amount of bonds issuances (excluding short term) in the first half of 2016 by GCC issuers is almost equal to the amount they issued during 2015.

Sovereign issuances have recently dominated the GCC bond market with a total of $20 billion, or 51 per cent of total bonds issued in 1H 2016. While the end of 2015 saw a $2.1bn issue of 5-year and 10-year bonds by the Bahrain Government, new records are being set in 2016 for big sovereign issuances from the region."

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