RIYADH: The global sukuk market is poised for a strong performance in 2024, with issuance volumes expected to surpass those of 2023 despite a slowdown in the year’s second half. 

According to a report by the global credit rating agency Moody’s, the issuance of Shariah-compliant bonds could reach between $200 billion and $210 billion this year, up from just under $200 billion in 2023. 

This growth is being fueled by robust sovereign issuance across the Gulf Cooperation Council and Southeast Asia, with Saudi Arabia playing a leading role.

Economic diversification efforts and the issuance boom 

The GCC region remains strong in the global sukuk market, accounting for a substantial share of the total issuance in 2024. 

In the first half of 2024, GCC sukuk issuance grew 138 percent year on year, reaching $69.2 billion. 

Saudi Arabia led this surge, comprising 37 percent of the total issuance. 

The Kingdom’s efforts to diversify its economy have bolstered investor confidence, making it a key market for the financial instrument. 

In the first half of 2024, the nation issued $17 billion in sukuk, primarily to refinance debt maturing later this year, as well as in 2025, and 2026. 

This pre-financing strategy is expected to continue throughout 2024 as Saudi Arabia accelerates key strategic projects tied to Vision 2030. It also reflects efforts toward economic diversification, a cornerstone of the blueprint that aims to reduce the Kingdom’s dependency on oil revenues.

Abdulla Al-Hammadi, the assistant vice president and an analyst at Moody’s, emphasized Saudi Arabia’s key position in the market, saying: “We expect full-year 2024 sukuk issuance volumes to exceed 2023, supported by strong sovereign issuance across the Gulf Cooperation Council and Southeast Asia, and from Saudi Arabia (A1 positive) and Malaysia (A3 stable) in particular.”

The Kingdom’s borrowing activities align with broader efforts to deepen its capital markets. The government has expanded its borrowing program to build its general reserves and finance major investments. 

This proactive fiscal policy is not just about addressing short-term financing needs; it is designed to maintain a robust presence in global debt markets and ensure steady progress on 2030’s ambitious goals.

Other GCC countries, including the UAE and Qatar, have also experienced significant growth in sukuk issuance. 

The UAE saw its volumes double to $8.6 billion in the first half of 2024, while Qatar witnessed a 258 percent year-on-year increase, reaching $4.57 billion. 

Both nations are implementing economic diversification strategies similar to those of Saudi Arabia, further cementing the region’s dominance in the sukuk market.

Southeast Asia, particularly Malaysia and Indonesia, is a vital region for these bonds. 

Malaysia, with its comprehensive Islamic finance ecosystem, accounted for nearly 30 percent of the total issuance in the first half of the year. 

Indonesian issuance is expected to rise in the latter half of 2024 as the government looks to fund its budget deficit and refinance existing sukuk.

Sustainable sukuk and ESG initiatives

A notable trend in 2024 has been the growing prominence of green and sustainable sukuk. 

These instruments, which align with environmental, social, and governance principles, are increasingly attractive to global investors. 

Saudi Arabia, in particular, has been a driving force behind this trend, issuing significant volumes of ESG-linked sukuk. 

In the first half of the year, issuances in this area reached $6 billion, with Saudi Arabia, the UAE, and Indonesia leading the charge. 

As the global focus on sustainability grows, the Kingdom has taken steps to promote investments in green projects, which is in line with its commitment to environmental stewardship.

Notable issuances include Al Rajhi Bank’s first dollar-denominated sustainable sukuk, valued at $1 billion, and Alinma Bank’s $1 billion additional tier one capital sukuk. 

These reflect Saudi Arabia’s intention to maintain leadership in sustainable finance while encouraging private sector participation in ESG initiatives.

Outlook for 2024 and beyond

Moody’s report highlights that while sukuk issuance is expected to slow in the second half of 2024, the long-term growth prospects for the market remain robust. 

Sovereign issuances from the GCC and Southeast Asia will remain strong, driven by continued efforts to diversify economies away from oil. By the end of the year, sovereign issuances by countries in the bloc, led by Saudi Arabia, could total $100 billion.

The increasing demand for sukuk is not limited to traditional Islamic markets, with investors worldwide are highly interested in these finance products, particularly green and sustainable offerings. 

Al-Hammadi highlighted: “The pool of investors will continue to grow, thanks to the growing popularity of Islamic products beyond core Islamic markets, rising demand for green and sustainable sukuk, and the increasing sophistication and diversity of Islamic instruments.”

Saudi Arabia is well-positioned to benefit from this trend, with its deepening capital markets, a growing reputation as a leader in sustainable finance, and robust economic reform agenda.

RIYADH: Saudi Arabia’s non-oil exports to Qatar surged 213 percent in the second quarter of 2024 compared to the previous three months, reaching SR5.79 billion ($1.54 billion), official data showed. 

According to the latest report by the General Authority for Statistics, the surge was driven primarily by shipments of transport equipment and parts, totaling SR4.59 billion.

The Kingdom also exported mechanical appliances and electrical products valued at SR154.4 million to Qatar during the same period, followed by shipments of live animals and related products at SR153.9 million.

This increase underscores Saudi Arabia’s broader economic diversification strategy, which seeks to mitigate the Kingdom’s historical dependence on oil revenues. 

Overall, Saudi non-oil exports grew 4.3 percent in the second quarter from the previous three-month period. The Kingdom also exported prepared food products and beverages worth SR103.8 million to Bahrain, and chemical and allied products valued at SR116.8 million. 

Saudi Arabia’s total outbound shipments to Arab countries reached SR12.15 billion in the second quarter, up 42.94 percent from the previous quarter. 

In terms of imports, Saudi Arabia received SR2.45 billion worth of goods during the same period. 

The UAE remained the top destination for Saudi non-oil exports, receiving SR15.07 billion in the second quarter. Non-oil shipments to China and India were SR7.08 billion and SR5.48 billion, respectively. 

Other notable exports included SR3.13 billion to Singapore, SR2.93 billion to Turkiye, and SR2.40 billion to Belgium. 

Earlier in September another report released by GASTAT noted that non-oil activities in Saudi Arabia witnessed a 4.9 percent year-on-year increase in the second quarter of 2024, driven by expansion of the finance and insurance sectors. 

Compared to the first quarter, non-oil activities rose 2.1 percent. The Kingdom’s seasonally adjusted gross domestic product increased by 1.4 percent quarter on quarter but saw a slight annual decline of 0.3 percent. 

The sharp rise in non-oil exports to Qatar highlights the ongoing success of Saudi Arabia’s economic diversification efforts. 

By boosting trade ties with key regional partners and expanding its non-oil export base, the Kingdom is reinforcing its strategy to build a more resilient and diversified economy, aligning with its Vision 2030 goals.