Economy

Saudi Arabia to significantly reduce debt issuance in second half of 2021: Fitch Rating

Saudi Arabia to Reduce Debt Issuance in Second Half of 2024

In a strategic move, Saudi Arabia is planning to decrease its debt issuance in the latter half of 2024, as reported by Fitch Ratings. This decision is fueled by substantial dividend payments from Aramco, which have lessened the need for sovereign financing.

Saudi Arabia Emerges as Top Debt Issuer in First Half of 2024

During the first half of 2024, Saudi Arabia took the lead as the largest issuer of US dollar debt among emerging markets (excluding China) and maintained its position as the top global sukuk issuer. This reflects the government’s strong fiscal management strategies.

Future Expansion Predicted for Saudi Arabia’s Debt Market

Fitch Ratings anticipates significant growth in Saudi Arabia’s debt market in the upcoming years. Bashar Al-Natoor, the global head of Islamic Finance at Fitch, projects that the Saudi sukuk and bond market could surpass $500 billion in outstanding value within the next few years.

Role of Vision 2030 in Strengthening Saudi Arabia’s Debt Market

Al-Natoor emphasized the importance of Vision 2030 projects, ongoing diversification efforts, and regulatory reforms in bolstering Saudi Arabia’s debt market. He highlighted the expectation for continued dollar debt issuance in 2025 as the country transitions to a more diversified economy.

Saudi Arabia’s Debt Market Growth and Investor Participation

By mid-2024, Saudi Arabia’s debt capital market had expanded by 18 percent year on year to $407.7 billion, with a significant portion in US dollar and riyal-denominated issuances. Foreign investor participation in the domestic government debt market has risen to 7.2 percent by mid-2024, driven by key reforms and the Kingdom’s inclusion in global bond indices.

Risks and Caution in Saudi Arabia’s Debt Market

Despite the promising growth in the debt market, Fitch Ratings has warned of potential risks such as fluctuations in oil prices and interest rates, concerns over debt issuance scale and purpose, and ongoing geopolitical uncertainties. Saudi Arabia’s strategic debt management and reforms position it as a key player in global debt markets during its economic transition.