Moody’s for Saudi: Increased oil reduces the need to issue Gulf sukuk

The president and analyst senior of Moody’s, Ashraf Madani, said that rising oil prices are reducing the issuance of sovereign sukuk by the Gulf countries, among a better performance budget and a decrease in the fiscal deficit.

Madani added in an interview with Al-Arabiya that oil prices are the main determinant in determining the financial deficit in the Gulf countries, and with the increase or decrease of the financial deficit, the volumes of the sukuk issued are affected.

He said sukuk emissions in the Gulf countries fell during the first half of questcompared to the same period a year earlier, buoyed by oil prices, he predicted that countries in the region would continue to reduce sukuk emissions in the second half of 2021.

Madani continued: “Last year we monitored an anomalous volume of sukuk issuance that exceeded $ 200 billion, due to the exceptional circumstances represented in the Corona pandemic and the need for some countries to issue bonds to finance anti programs. -Corona, and also because of the suffering of the Gulf countries for low oil prices “.

Madani said: “Our expectations for the year in current are the stability of emissions, including different expectations on the decline in emissions from the Gulf countries, offset by the increase in emissions from Southeast Asian countries that suffer from high budget deficits and countries that need to finance their budget and they are not much affected by oil prices, like the Gulf countries “.

He predicted that sovereign, corporate and bank issues in Asian countries will increase throughout the year in course, keeping emissions between 190 and 200 billion, compared to 205 billion dollars in 2020.

Regarding Egypt’s entry into the sukuk market for the first time during the first half of 2022, Madani said that Egypt has a large economy, a large population and a Muslim majority, but the Islamic banking sector is still small, so the possibility of increasing it from its current position is very large.

The Moody’s analyst suggested that Egypt’s entry into the market would be gradual and small in size, and would not be of actual size in the short term, and it would take time to become a major market source and a major player as such as Saudi Arabia and Malaysia.

On the possibility of market activity of green sukuk in the region, Madani said that green sukuk emissions exist, but there are determinants of the growth of these sukuk, especially since many companies do not have a structure for the topic of environmental sustainability and intend to invest in this argument and therefore benefit from these emissions.

At the same time, Madani stressed that the lack of projects, especially that the region depends mainly on the oil industry, risks being less skilled green projects than other countries with greater economic diversity.

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