Fitch Ratings anticipates that Gulf countries will remain among the largest issuers of dollar-denominated debt in emerging markets and a major source of global dollar-denominated sukuk in 2025 and 2026.
The agency attributes this trend to government-led initiatives aimed at developing the debt market, advancing economic diversification efforts, and addressing fiscal deficits. Additionally, the need to finance large-scale projects and refinance significant upcoming maturities will further drive debt and sukuk issuances across the region.
Fitch Ratings reported that Gulf debt markets across all currencies surpassed a record $1 trillion by the end of January, marking a 10% increase compared to 2024. The agency noted that Gulf banks are expected to issue over $30 billion in dollar-denominated debt in 2025, as many major companies in the region have begun issuing sukuk and bonds to diversify their revenue streams.
Saudi Arabia in the Lead
Despite the growth in Gulf debt markets, the overall landscape remains fragmented and uneven, with Saudi Arabia and the UAE leading as the most mature markets in the region. Saudi Arabia accounted for the largest share of debt issuances across all currencies at 44.8%, followed by the UAE at 29.9%, Qatar at 12.8%, and approximately 4% each for Bahrain, Oman, and Kuwait.
Fitch noted that a decline in oil prices could drive further growth in Gulf capital markets, as lower government revenues typically lead to increased borrowing. The agency also expects Gulf central banks to align with the US Federal Reserve in reducing interest rates, which would create a favorable financing environment for debt issuances.
Moreover, Fitch highlighted that dollar-denominated debt issued by Gulf countries in 2024 accounted for a quarter of the total emerging markets debt (excluding China), with Saudi Arabia and the UAE leading the issuances. The agency further noted that Gulf capital market issuances in dollars surged by 65.8% in 2024, reaching $133.4 billion.
Releases
Fitch expects debt markets in Saudi Arabia and the UAE to continue growing in 2024, while projecting that Kuwait will become the third-largest issuer of dollar-denominated debt in the Gulf, with total issuances reaching $13.6 billion, primarily driven by banks. The agency noted that despite the absence of a public debt law, which, if enacted, would allow the government to re-enter international debt markets, Kuwait’s financial sector remains active in debt issuance.
Historically, Kuwait’s debt issuance has been rare and sporadic, with a total of $11.8 billion, primarily from banks that were issued between 2018 and 2023. The current Kuwaiti government aims to revise liquidity laws to facilitate borrowing from global capital markets, though the timeline for these reforms remains uncertain.
Gulf Sukuk
Fitch reported that sukuk accounted for approximately 40% of the Gulf’s capital markets as of the end of January 2025, with the remainder comprising bonds. Gulf sukuk represent over 40% of total global sukuk issuances, with 80% classified as investment grade by the agency. The region saw a 43% growth in sukuk issuances in 2024, reaching $87.5 billion, with Gulf banks playing a significant role in both issuing and investing in sukuk.
Source: Al Qabas
