Abu Dhabi, UAEWednesday 16 October 2019

Saudi Arabia raises 8.8bn riyals through sukuk issuance

The kingdom has been regularly issuing local currency Islamic bonds to diversify its funding base

Saudi Arabia issues another tranche of riyal-denominated sukuk in September. Bloomberg
Saudi Arabia issues another tranche of riyal-denominated sukuk in September. Bloomberg

Saudi Arabia raised 8.834 billion Saudi riyals (Dh8.66bn) through a local currency-denominated Islamic bond issue as it continues to borrow from the domestic market as part of its wider debt management strategy to shore up finances and diversify its funding base.

The funds raised through September issuance under the government’s riyal-denominated Sukuk Program, were divided into three tranches for local lenders, Saudi Arabia’s Ministry of Finance said in a statement posted on its website.

The ministry raised 1.4bn riyals in the first tranche, part of a 4.65bn riyal programme due to mature in 2028. It raised 1.19bn under an 11bn riyal programme maturing in 2031, and raised 6.25bn riyals under a 15.5bn riyal issue maturing in 2049, according to its statement.

The kingdom raised 2.26bn Saudi riyals in August and 5.22bn Saudi riyals in July through its riyal-denominated sukuk issuance programme.

Saudi Arabia, the biggest Arab economy and Opec’s top oil producer, has regularly tapped the domestic debt markets with conventional and Sharia-compliant debt to bridge a fiscal deficit caused by low oil prices. At the end of 2018, the kingdom had more than $80 billion (Dh294bn) in outstanding domestic debt, borrowed through both conventional and Islamic bonds.

It has been issuing bonds in international debt markets since 2016 and is currently regarded as one of the biggest emerging markets issuers, having sold nearly $60bn in international bonds, including $11bn in Sharia-compliant debt issuance, according to reports.

The kingdom has unveiled two record expansionary budgets in a row for 2018 and this year as it looks to boost growth in the wake of fiscal consolidation and lower oil revenues as production has been cut to meet Opec+ output targets.

Saudi Arabia is expected to raise $3bn to $5bn in fresh debt through sukuk issuance in the third quarter of this year, Reuters reported in May, citing Fahad Al Saif, who heads the kingdom’s debt management office.

In a media round table event on the Islamic finance market on Tuesday, ratings agency S&P said the sukuk market expanded strongly in the first eight months of 2019, with $113bn issued globally, up 34 per cent year-on-year. It expects the total volume of issuance in Islamic countries to reach $140-$150bn this year, up from $131bn in 2018.

Updated: September 17, 2019 04:36 PM

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