RIYADH: Qatar’s sukuk issuances surged by 122 percent in the first half of this year compared to the same period in 2023, reaching $500 million, according to a new analysis.
In its latest report, Fitch Ratings indicated that overall bond issuance in the country also increased by 59 percent year on year to $12.4 billion in the first six months of 2024.
The US-based credit rating agency noted that the debt capital market in Qatar is expected to remain broadly stable due to the government’s ongoing debt repayments and limited access to corporate DCM.
The DCM is a market for trading securities such as bonds and promissory notes, utilized by companies and governments for long-term funding.
Qatar’s DCM is the third-largest in the Gulf Cooperation Council region, following Saudi Arabia and the UAE.
In July, Fitch reported that DCM issuances in the GCC are approaching the $1 trillion outstanding mark, with growth expected through 2024 and 2025.
“The sovereign holds the majority of the DCM in Qatar. Most Qatari banks have also issued senior unsecured debt to extend their maturity profiles and diversify funding. Corporate issuances have been small,” Fitch stated.
By the end of the first half of this year, Qatar’s DCM stood at $130 billion, unchanged from the same period last year. The analysis revealed that sukuk issuances accounted for 10 percent of the gulf nation’s DCM, down from 13 percent in the same period of 2023.
Fitch reported that the majority of DCM outstanding was denominated in US dollars at 65 percent, followed by Qatari riyals at 30 percent by the end of the first half of this year.
“The regulator has taken steps to advance the still-developing DCM in recent years. However, DCM limitations remain, such as the nascent riyal-DCM market, the concentration of the investor base in banks and most corporates preferring bank financing over bonds or sukuk,” the agency noted.
The report further highlighted that the Qatar Central Bank published its environment, social, governance, and sustainability strategy for the financial sector in June. This strategy aims to enhance sustainable finance and develop ESG sukuk and bonds.
Outcomes include increasing transparency regarding the financial sector’s role in national sustainability through a taxonomy of sustainable activities and guidelines for issuing sustainable products like loans, bonds, and sukuk.
According to Fitch, ESG debt in Qatar reached $3.8 billion by the end of the first half of this year, with sukuk accounting for 19.5 percent.
“The inclusion of sukuk will attract investors seeking shariah-compliant, ESG options. These initiatives are intended to enhance Qatar’s appeal to global investors focused on sustainability,” the report concluded.
