Global long-term sovereign sukuk issuance is expected to rise 6 per cent to $75 billion (Dh275.4bn) in 2020 as governments look to raise more money to meet financing requirements in the wake of lower oil prices and the coronavirus outbreak, according to a report from Moody’s Investors Service.
“Issuance volumes could rise more markedly if oil prices and demand were to be durably dampened as a consequence of the coronavirus outbreak, leading to higher deficits and financing requirements among hydrocarbon-exporting issuers, including those in the GCC and Southeast Asia,” Moody’s said.
In 2021, however, total long-term sovereign sukuk issuance is expected to decline as fiscal positions of major issuers improve and a larger portion of government funding is met by external sources due to stabilisation of global markets.
“Beyond that, gross sovereign issuance will rise further as sukuk from GCC governments begin to mature.”
Saudi Arabia, Indonesia and Malaysia will continue to increase the share of domestic sukuk in their fiscal deficit financing and Turkey is also expected to continue being a prominent sukuk issuer.
“Issuance in 2020 would likely surpass our forecasts should oil prices stabilise at the current levels of $25-$35 per barrel, lower than our average oil price assumption of around $43 per barrel for the full year.”
The fiscal deficits of GCC governments, particularly Saudi Arabia, Bahrain and Oman, as well as Indonesia and Malaysia are expected to widen due to lower oil prices, it said.
in 2019, sukuk issuance by GCC governments increased 13.5 per cent despite a fall in their combined fiscal deficits to $43bn from $54bn in 2018.