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The Kingdom’s debt capital market is on track to cross the USD 500 bn mark by year-end, buoyed by a widening budget deficit and a growing need to diversify funding in light of weaker oil prices, according to a Fitch commentary. Roughly 94% of rated Saudi sukuk sit in the A range, with most issuers holding a stable outlook, according to Fitch.
By the numbers: Saudi Arabia’s debt capital markets grew 16% y-o-y to USD 465.8 bn outstanding in 1Q 2025, with sukuk accounting for 60.4%. Meanwhile, foreign investors ramped up their exposure to Saudi debt, holding 7.7% in 1Q, up from 4.5% at the end of last year.
What the pundits are saying: Falling oil prices and growing budget gaps will lead to more debt being issued in 2025 and 2026. Banks, companies, and projects will likely turn to the debt capital markets for more varied funding, said Bashar Al Natoor, managing director and global head of Islamic finance at Fitch.
Saudi has a solid sukuk market: “We [Fitch] rate about 80% of the outstanding [USD] Saudi sukuk market, with almost all investment-grade and no defaults,” Al Natoor said.
Saudi issuers topped the charts for USD debt in emerging markets (excluding China) last quarter. Globally, the Kingdom was also the largest issuer of USD-denominated sukuk in 1Q, and dominated the GCC debt capital markets, raising USD 31.2 bn across 46 bond and sukuk issuances. Saudi corporate issuances accounted for the lion’s share of the market, raking in some USD 32.1 bn, against USD 19.4 bn in sovereign debt.
ON THE MACRO PICTURE- Fitch expects the government’s budget deficit to widen to 5.1% of GDP in 2025, up from 2.8% last year, as oil revenues and Aramco dividends come under pressure. This falls below the government projection, which sees the deficit coming in at 2.3% of GDP this year.
Government debt is forecast to climb nearly 37% of GDP by the end of next year, up from 29.9% last year. The shift comes as Opec+ production cuts and tariff-driven global volatility weigh down on crude prices — with Brent now forecast to average USD 65 per barrel through 2026, a far cry from the USD 83-85 the Kingdom needs to balance the books.
