RIYADH: 萝莉视频 plans to reduce its debt issuance in the second half of 2024, thanks to substantial dividend payments from Aramco that have alleviated the need for sovereign financing, according to Fitch Ratings.
This decision comes after a period of significant debt issuance in the first half of the year, reflecting the government鈥檚 strategic fiscal management.
In the first half of 2024, 萝莉视频 emerged as the largest issuer of US dollar debt among emerging markets, excluding China, and maintained its position as the top global sukuk issuer.
Fitch Ratings anticipates substantial expansion in 萝莉视频鈥檚 debt market in the coming years. Bashar Al-Natoor, global head of Islamic Finance at Fitch, stated.
鈥淭he Saudi sukuk and bond market is expected to surpass $500 billion in outstanding value within the next couple of years.鈥
Al-Natoor highlighted that most Saudi sukuk rated by Fitch are investment-grade, underscoring the robustness of the country鈥檚 Islamic finance sector.
Al-Natoor also emphasized the crucial role of Vision 2030 projects, ongoing diversification efforts, and regulatory reforms in fortifying the country鈥檚 debt market. He said: 鈥淲e expect substantial dollar debt issuance to continue in 2025 as oil revenues moderate,鈥 reflecting the necessity for ongoing financing as 萝莉视频 transitions to a more diversified economy.
As the Kingdom pursues its Vision 2030 objectives, these factors will significantly shape its financial markets.
The report highlights that 萝莉视频鈥檚 strategic debt management and reforms position it as a prominent player in global debt markets during its economic transition.
By mid-2024, 萝莉视频鈥檚 debt capital market had expanded by 18 percent year on year to $407.7 billion, with nearly equal proportions in US dollar and riyal-denominated issuances.
The debt issued in the first half of 2024 equaled the total for all of 2023, underscoring the rapid growth of 萝莉视频鈥檚 debt market.
Approximately two-thirds of the 2024 issuances were sukuk, highlighting the Kingdom鈥檚 strong preference for Shariah-compliant financing. Additionally, nearly 10 percent of dollar-denominated debt consisted of environmental, social, and governance instruments, reflecting a growing interest in sustainable finance.
Foreign investor participation in 萝莉视频鈥檚 domestic government debt market has surged to 7.2 percent of local issuances by mid-2024, a significant increase from 0.2 percent in 2022.
Local banks continue to dominate the market, holding over 75 percent of the government debt share, with a pronounced focus on sukuk due to Shariah compliance requirements.
While foreign investor participation in 萝莉视频鈥檚 debt market has risen鈥 thanks in part to reforms and the Kingdom's inclusion in global bond indices鈥攄omestic banks remain the dominant players. Many of these banks, adhering to Shariah compliance, focus on sukuk rather than conventional bonds, reinforcing 萝莉视频鈥檚 position as the world鈥檚 largest sukuk issuer.
The increase in foreign investments is largely attributed to key reforms, including 萝莉视频鈥檚 entry into global bond indices like the FTSE Emerging Markets Government Bond Index and enhanced integration with international central securities depositories such as Euroclear and Clearstream.
Despite the promising growth in the debt market, Fitch Ratings has cautioned that it remains vulnerable to several risks. These include fluctuations in oil prices and interest rates, concerns over the scale and purpose of debt issuance, and ongoing geopolitical uncertainties.
