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  • 16-05-23

    Saudi Arabia Returns to Debt Markets with Dollar Islamic Bonds, Boosting Islamic Finance Industry

    (MENAFN) Saudi Arabia has made a return to the debt markets by offering dollar-denominated Islamic bonds with six-year and 10-year tenors, according to a bank document. The initial guidance for the six-year sukuk indicates a spread of around 110 basis points over US Treasuries, while the 10-year sukuk is expected to have a spread of around 135 basis points over US Treasuries. Global coordinators for the bond issuance include Citi, JPMorgan, and Standard Chartered, while Aljazira Capital, BNP Paribas, and Goldman Sachs are also involved in the deal.

    This issuance marks Saudi Arabia's second foray into the public debt markets this year, following a USD10 billion conventional bond offering in January. The move aligns with Saudi Arabia's efforts to diversify its funding sources and tap into international capital markets.

    The Islamic finance industry is expected to experience growth in the coming years, thanks to Saudi Arabia's robust banking system, according to a report by S&P Global Ratings. The agency forecasts approximately 10 percent growth across the industry in 2023-2024, building upon the expansion observed in 2022, with Saudi Arabia and Kuwait playing a significant role in driving the sector's growth.

    S&P Global Ratings also predicts that despite an anticipated economic slowdown and a decline in sukuk issuance this year, the supply of new sukuk issuances will surpass the volume of maturing sukuk. This outlook aligns with findings from Fitch Ratings, which suggests that global sukuk issuance in the second quarter of 2023 is on the rise despite short-term uncertainties stemming from macroeconomic volatilities.

    However, S&P Global Ratings acknowledges a projected deceleration in real GDP growth across Gulf Cooperation Council (GCC) economies in 2023-2024 compared to the previous year. This is primarily attributed to lower oil production, which has a significant impact on the region's economies.

    MENAFN16052023000045014228ID1106250733

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