GCC governments have issued about $45 billion in bonds and sukuk so far this year, putting the region’s sovereigns on track for the most debt issuance since 2020. The volume has increased significantly this year, with the first half of 2024 alone reaching well above the $33 billion issued in the whole of last year.
Oil prices have averaged $83 per barrel so far this year, similar to the average for last year, and several countries that have issued bonds and sukuk this year are expected to run budget surpluses in 2024, including the UAE and Qatar.
For these issuers, the capital was raised not to finance regular budget spending but to build a benchmark yield curve against which corporates could more efficiently price their debt, and in the case of Qatar, to fund environmentally friendly projects specifically. The sums raised were relatively small: Abu Dhabi raised a total of $5 billion in three tranches of five, 10 and 30 years, while Qatar issued its first-ever green bond of $2.5 billion across five and 10-year tranches.
The bulk of sovereign debt issuance so far this year has been from Saudi Arabia, which has raised over $35 billion in bonds and sukuk year-to-date, more than three-quarters of total GCC sovereign issuance. About half of this was in dollar-denominated debt. Last year, Saudi Arabia also accounted for 77 per cent of total GCC government bond and sukuk issuance.
Separately, the secondary offering of Aramco shares raised another $11.2 billion in capital for the government last week. Emirates NBD expects the Saudi budget to run a deficit of about 4.2 per cent of gross domestic product this year or approximately $45 billion.
The funds raised through both debt and equity capital markets will be enough to cover this, but it is possible that the kingdom could tap capital markets again in H2. This suggests that the total capital raised this year is likely to exceed what is required just to finance the budget deficit.
Additionally, the Public Investment Fund has also been active in debt capital markets, raising about $8 billion so far this year through bonds and sukuk, including most recently a pound-denominated bond last week.
The capital raised by both the government of Saudi Arabia and PIF will be partly used to fund the ambitious infrastructure investment that is required to deliver the medium- and long-term goals of the kingdom, including economic diversification.
According to data from MEED Projects, over $100 billion worth of projects were awarded in Saudi Arabia last year, up 75 per cent from the value of contracts awarded in 2022. The bulk of these projects are in the construction, power and transport sectors. More than 80 per cent of projects currently in execution are government projects.
In addition to the value of projects that have been awarded and are currently in execution, there is a significant pipeline of planned projects in the kingdom. MEED data point to the value of projects in planning stages – both public and private – being in the region of $735 billion at the time of writing.
However, the bulk of these projects are in a design or study phase, with a significantly smaller share in more advanced stages, meaning that potentially not all these projects will make it to the execution phase. This figure doesn’t include the full budgets of all the giga-projects, as not all the funds have been allocated to specific subprojects yet.
While there is certainly room to scale back some of the planned spending, the government of Saudi Arabia has committed to hosting several major international events over the next decade, including the Asian Winter Games in Neom in 2029, the World Expo in Riyadh in 2030, and the FIFA World Cup in 2034.
These are fixed deadlines by which time the host cities must be able to accommodate and run these events, and for which the necessary infrastructure must be complete. The funding requirements are thus likely to be significant not just in 2024, but over the next few years as well. We expect Saudi Arabia, PIF and related entities to continue to drive GCC government bonds and sukuk issuance over the next three years at least.
Khatija Haque is chief economist and head of research at Emirates NBD
What is Reform?
Reform is a right-wing, populist party led by Nigel Farage, a former MEP who won a seat in the House of Commons last year at his eighth attempt and a prominent figure in the campaign for the UK to leave the European Union.
It was founded in 2018 and originally called the Brexit Party.
Many of its members previously belonged to UKIP or the mainstream Conservatives.
After Brexit took place, the party focused on the reformation of British democracy.
Former Tory deputy chairman Lee Anderson became its first MP after defecting in March 2024.
The party gained support from Elon Musk, and had hoped the tech billionaire would make a £100m donation. However, Mr Musk changed his mind and called for Mr Farage to step down as leader in a row involving the US tycoon's support for far-right figurehead Tommy Robinson who is in prison for contempt of court.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Five expert hiking tips
Always check the weather forecast before setting off
Make sure you have plenty of water
Set off early to avoid sudden weather changes in the afternoon
Wear appropriate clothing and footwear
Take your litter home with you
Western Region Asia Cup T20 Qualifier
Sun Feb 23 – Thu Feb 27, Al Amerat, Oman
The two finalists advance to the Asia qualifier in Malaysia in August
Group A
Bahrain, Maldives, Oman, Qatar
Group B
UAE, Iran, Kuwait, Saudi Arabia
UAE group fixtures
Sunday Feb 23, 9.30am, v Iran
Monday Feb 25, 1pm, v Kuwait
Tuesday Feb 26, 9.30am, v Saudi
UAE squad
Ahmed Raza, Rohan Mustafa, Alishan Sharafu, Ansh Tandon, Vriitya Aravind, Junaid Siddique, Waheed Ahmed, Karthik Meiyappan, Basil Hameed, Mohammed Usman, Mohammed Ayaz, Zahoor Khan, Chirag Suri, Sultan Ahmed
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T20 World Cup Qualifier fixtures
Tuesday, October 29
Qualifier one, 2.10pm – Netherlands v UAE
Qualifier two, 7.30pm – Namibia v Oman
Wednesday, October 30
Qualifier three, 2.10pm – Scotland v loser of qualifier one
Qualifier four, 7.30pm – Hong Kong v loser of qualifier two
Thursday, October 31
Fifth-place playoff, 2.10pm – winner of qualifier three v winner of qualifier four
Friday, November 1
Semi-final one, 2.10pm – Ireland v winner of qualifier one
Semi-final two, 7.30pm – PNG v winner of qualifier two
Saturday, November 2
Third-place playoff, 2.10pm
Final, 7.30pm
