Saudi Arabia’s debt capital market could top USD 500 bn by the year-end, up from the USD 430 bn registered at the end of 2024, as the government turns to debt markets to fund diversification efforts, Alarabiya said, citing a report from Fitch Solutions.

2024’s debt market in numbers: The Kingdom became the largest issuer of USD debt in emerging markets — outside of China — last year, and the leading issuer of USD-denominated sukuk worldwide, Global Head of Islamic Finance at Fitch Ratings Bashar Al Natour told Alarabiya. The Saudi bond and sukuk market grew 20% in 2024, hitting USD 430 bn, with USD-denominated issuances comprising 50% and SAR-denominated issuances comprising 48%. While the government remains the primary issuer, banks and companies have also entered the fray, boosting market dynamism, Al Natour added.

What to watch out for: A decline in global interest rates, geopolitical risks, and oil price fluctuations could negatively impact demand in the local debt market, Al Natour explained.

IN CONTEXT- FinMin approved FY 2025’s borrowing plan earlier this month, outlining a requirement for some SAR 139 bn (USD 37 bn) in new public debt. The targeted amount is intended to bridge an anticipated SAR 101 bn budget deficit penciled in for the new fiscal year, while also covering some SAR 38 bn required to meet principals’ repayments for loans maturing during the period. FinMin also closed a USD 12 bn (SAR 45 bn) international bond issuance — its first of the year — earlier this month, with the issuance 3x oversubscribed.

REMEMBER- Fitch Ratings affirmed Saudi Arabia’s long-term foreign-currency issuer default rating at A+ with a stable outlook earlier this month, citing a robust fiscal position, strong external balance sheets, and “significant fiscal buffers” in deposits and other public sector assets.

Demand breakdown: USD-denominated securities usually see demand from local, regional, and global investors concentrated in the US, Europe and Asia, while SAR-denominated issuances are usually snapped up by local banks, Al Natour said. Foreign investors make up 4.5% of the SAR-denominated debt market — a relatively small percentage compared to global markets, as the Kingdom still needs to build a strong track record, he argued.

DATA POINT- Saudi-listed sukuk and bond issuances rose 15% to SAR 633.5 bn in 4Q 2024, while traded value dropped 29.6% to SAR 3.3 bn, Tadawul reported last month. Government debt made up 97.4% of total issuances, totaling SAR 617 bn, with corporate sukuk and bonds at 2.6% (SAR 16.5 bn).

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