Refinancing of GCC debt to take centrestage this year

Refinancing of GCC debt to take centrestage this year

With close to $45 billion of GCC debt maturing this year, refinancing of these instruments are expected to account for the bulk of the bond issuances by corporates and governments in the region this year, a report showed.

According to Kamco Invest’s GCC Fixed Income Market : 2023, this would be further supported by a strong pipeline of projects across the GCC related to the respective diversification goals. “We expect fresh issuances to be front-end loaded as seen recently and earlier-than-expected rate cuts to more evenly spread the issuances during the year,” Junaid Ansari, Kamco’s head of investment strategy and research, wrote in the report. Fiscal deficits by some sovereigns in the region is another factor supporting issuances by GCC sovereigns, he added.

Issuances of sukuk is expected to increase this year after seeing two straight years of declines until last year. “Key motivations for growth in sukuk issuance includes lower prevailing rates, crude oil prices remaining subdued around the $70 per barrel levels as well as diversification as a number of countries and corporates are embracing Islamic sukuk in their funding mix. Sovereigns in the GCC would be particularly looking at raising debt using the sukuk route due to the subdued expectations for oil prices,” the report said.

Moreover, maturity of sukuk is probably the highest on record in the case of GCC issuers at $37.9 billion in 2024. Refinancing of these securities should keep GCC issuances elevated in 2024, the report said.

The UAE witnessed the biggest growth in bond issuances during the year reaching $31.5 billion during 2023 as compared to $19.8 billion in 2022. Total bond issuances by GCC countries stood at $58.2 billion during 2023 as compared to $40.4 billion during 2022, registering an increase of 44.2 per cent or $17.8 billion.