GCC debt capital market (DCM) issuances are moving towards the $1 trillion outstanding mark, growing through 2024 and 2025, Fitch said in a new report.

The DCM in the GCC region has grown 7% year-on-year (YoY) to $940 billion outstanding at the end of the first quarter of 2024, with the largest shares in Saudi Arabia (43%) and the UAE (30%).

Fitch, which rates over 70% of GCC US dollar sukuk, said 40% of DCM outstanding were sukuk by the end of the first quarter, with the rest in bonds.

Government issuances will be driven by expected lower oil prices and interest rates as well as initiatives to develop the DCMs and further diversify funding channels, Fitch said.

“Most GCC countries have come a long way in developing their DCMs, with the bloc now accounting for almost a third of total emerging-market dollar issuance, excluding China,” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings.

Saudi Arabia is aiming to deepen its DCM, with issuance driven by budget deficits, he said, adding the UAE is projected to continue issuances despite surpluses.

On the other hand, DCMs in Qatar and Oman are contracting, given that they are expected to repay debt further in 2024.

The debt law absence limits Kuwait’s funding options, Al Natoor said. 

Bahrain is dependent on DCM access and GCC funding amid wide deficits, he added.

(Editing by Seban Scaria seban.scaria@lseg.com )