Fitch Ratings, a global credit rating agency, predicts that dollar-denominated debt issuances by Gulf Cooperation Council (GCC) banks will surpass $30 billion in 2025. This comes after 2024, which was their strongest year to date, with total issuances reaching $42 billion.
The agency notes that the anticipated rise in issuances for 2025 will be driven by approximately $23 billion in bonds maturing lower interest rates on the dollar, and strong demand for credit.
Fitch expects the Federal Reserve to reduce interest rates by 100 basis points in 2025, creating more favorable financing conditions. Consequently, credit growth in the GCC is expected to be robust, particularly in Saudi Arabia and the United Arab Emirates.
In 2024, dollar-denominated debt issuance by GCC banks significantly surpassed the previous record of $25.6 billion set in 2020. This surge was driven by high credit growth in Saudi Arabia, banks diversifying their funding sources through increased issuance of short-term certificates of deposit ($8.6 billion), as well as higher debt maturities, fueled by strong investor sentiment.
The agency highlighted that banks from Saudi Arabia and the UAE were the main contributors to issuances in 2024, each accounting for about one-third of the total. Saudi banks have become increasingly active in international debt capital markets since 2020 to support robust financing growth plans, diversify their funding bases, and, more recently, to meet the rising demand for foreign currencies, which helps offset the high cost of domestic liquidity.
Fitch expects that dollar-denominated debt issuances by Saudi banks will continue to represent a large proportion of total GCC issuances, thanks to the country’s strong credit growth outlook, particularly in the corporate sector, and banks’ increased reliance on external funding due to intense competition for domestic liquidity.
In 2024, GCC banks accounted for roughly 18% of dollar issuances among emerging market banks, and this figure rose to 36% when excluding Chinese banks.
Financing conditions are expected to improve further as the Federal Reserve implements rate cuts. GCC banks are projected to benefit from strong investor confidence, bolstered by high oil prices and generally favorable regional liquidity. Most GCC banks possess strong investment-grade credit ratings.
GCC banks issued more short-term certificates of deposit (CDs) from major global financial centers, including New York, London, Hong Kong, and Singapore. This strategy broadens their investor base and liquidity pools while deepening their trade and business relationships. CDs from these centers accounted for approximately 21% of total GCC bank issuances in 2024.
Fitch noted that Islamic finance is well established in the Middle East, and there is increasing interest among conventional banks in issuing sukuk, which represented nearly half of the issuances in 2024, excluding certificates of deposit. This trend reflects strong investor demand for sukuk, as they allow issuers to reach investors looking to comply with Islamic law while also addressing pricing dynamics.
Currently, the debt of Gulf banks due in 2025 amounts to around $23 billion, with Qatari banks responsible for about one-third of this debt, compared to approximately one-quarter for each of the UAE and Saudi banks.
