RIYADH: Saudi Arabia 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’s strategic fiscal management.

In the first half of 2024, Saudi Arabia 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 Saudi Arabia’s debt market in the coming years. Bashar Al-Natoor, global head of Islamic Finance at Fitch, stated.

“The Saudi sukuk and bond market is expected to surpass $500 billion in outstanding value within the next couple of years.”

Al-Natoor highlighted that most Saudi sukuk rated by Fitch are investment-grade, underscoring the robustness of the country’s Islamic finance sector.

Al-Natoor also emphasized the crucial role of Vision 2030 projects, ongoing diversification efforts, and regulatory reforms in fortifying the country’s debt market. He said: “We expect substantial dollar debt issuance to continue in 2025 as oil revenues moderate,” reflecting the necessity for ongoing financing as Saudi Arabia 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 Saudi Arabia’s strategic debt management and reforms position it as a prominent player in global debt markets during its economic transition.

By mid-2024, Saudi Arabia’s 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 Saudi Arabia’s debt market.

Approximately two-thirds of the 2024 issuances were sukuk, highlighting the Kingdom’s 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 Saudi Arabia’s 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 Saudi Arabia’s debt market has risen— thanks in part to reforms and the Kingdom's inclusion in global bond indices—domestic banks remain the dominant players. Many of these banks, adhering to Shariah compliance, focus on sukuk rather than conventional bonds, reinforcing Saudi Arabia’s position as the world’s largest sukuk issuer.

The increase in foreign investments is largely attributed to key reforms, including Saudi Arabia’s 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.

JEDDAH: Saudi Arabia and Germany are set to strengthen their economic ties in the finance sector following high-level talks between officials from both countries. 

The Kingdom’s Investment Minister Khalid Al-Falih met with the European country’s Finance Minister Christian Lindner to discuss advancing investment relations, strengthen cooperation and address mutual interests in this critical area.  

This comes as Germany exported €705 million ($775.5 million) worth of goods to Saudi Arabia in June, while imports from the Kingdom totaled $180.4 million, resulting in a trade surplus of $595.1 million, according to the Observatory of Economic Complexity.  

Germany’s exports to Saudi Arabia increased by $89.5 million over the past year, while imports from the Kingdom dropped by $116.6 million, reflecting shifting trade dynamics.   

Referencing his meeting with Lindner In a post on his X account, Al-Falih said: “... we discussed ways to develop and advance investment relations between our two countries in a number of vital sectors of common interest, especially the financial sector.” 

Al-Falih also met with German Vice Chancellor and Minister for Economic Affairs and Climate Action Robert Habeck to explore new avenues for collaboration.  

The meeting, attended by Saudi Ambassador to Germany Prince Abdullah bin Khaled bin Sultan, underscored the commitment to deepening bilateral financial ties. 

Additionally, Al-Falih engaged with Jorg Kukies, state secretary at Germany’s Federal Chancellery, to discuss strategies for strengthening economic relations.  

He also participated in a roundtable meeting with leaders of German companies across various sectors, including automotive, investment funds, energy, manufacturing, and supply chains. 

The minister noted that the meeting reviewed Germany’s key expansion interests in the Kingdom and highlighted the diverse investment opportunities available across various sectors. 

He also attended the NUMOV MENA 2024 conference, focusing on Saudi-German collaboration in emerging and advanced technologies.  

NUMOV, Germany’s oldest and largest organization promoting economic development with the Near and Middle East, has supported bilateral business relationships for 90 years. 

The Saudi minister also participated in the board meeting of the Arab-German Chamber of Commerce and Industry, where he discussed the partnership between the two countries and the Kingdom’s ambitious plans under Vision 2030. 

He also covered developments in key areas such as renewable energy, biotechnology, and artificial intelligence.