Throughout the current year, GCC nations have collectively issued approximately $45 billion in bonds and sukuk. This impressive figure indicates that they are on course to surpass the record levels of debt issuance last seen in 2020. In just the first half of 2024 alone, the amount raised considerably exceeded the entire previous year’s total of $33 billion.
Despite oil prices maintaining an average of $83 per barrel this year, mirroring last year’s average, certain countries, notably the UAE and Qatar, are expected to generate budget surpluses. Rather than covering routine fiscal expenditures, these countries have utilized the capital for creating a benchmark yield curve that aids corporations in pricing their debt more effectively. Moreover, in Qatar’s case, the funds are earmarked for eco-friendly initiatives. For instance, Abu Dhabi secured $5 billion through three different maturities, while Qatar inaugurated its first green bond raising $2.5 billion.
However, the lion’s share of sovereign debt so far this year emanates from Saudi Arabia, which has amassed over $35 billion via bonds and sukuk, comprising more than three-quarters of the total GCC sovereign issuance. Approximately half of this was raised through debt denominated in US dollars. The prior year also saw Saudi Arabia contributing to 77 percent of the GCC’s government bond and sukuk issuance.
In a parallel development, the secondary offering of Aramco shares generated an additional $11.2 billion for the Saudi government. With Emirates NBD projecting a deficit of about 4.2 percent of the GDP for the Saudi budget this year, the funds raised through debt and equity capital markets are anticipated to cover it, although further market engagement could occur in the second half of the year. The implication is that the total capital mobilized this year may well surpass the amount required to bridge the budget deficit.
Furthermore, the Public Investment Fund (PIF) has been proactive in the debt capital markets, securing around $8 billion through various instruments, including a recent pound-denominated bond issuance.
Both the Saudi government and the PIF intend to allocate a portion of the raised capital to support ambitious infrastructure investments that are critical for achieving the nation’s medium- and long-term objectives, such as economic diversification.
Data from MEED Projects reveals that Saudi Arabia awarded contracts for projects worth over $100 billion last year, an increase of 75 percent compared to 2022. A majority of these ongoing projects are government-driven, with a particular focus on construction, power, and transport sectors.
Alongside the awarded and ongoing projects, there is also a considerable number of planned projects in Saudi Arabia. MEED’s data suggests that the value of these projects in the planning stages, encompassing both public and private sectors, is about $735 billion. However, many of these projects are currently in preliminary design or study phases, and thus, it’s uncertain if all will advance to execution. Notably, the budgets for the mega-projects are not fully accounted for in this figure, as specific subproject allocations are yet to be determined.
While some scaling back of planned expenditures is feasible, Saudi Arabia has committed to hosting several major international events in the coming decade, including the Asian Winter Games in Neom in 2029, the World Expo in Riyadh in 2030, and the FIFA World Cup in 2034. These events come with strict deadlines for the necessary infrastructure completion, implying substantial funding needs not just for 2024 but also for the years leading up to these events. It is anticipated that Saudi Arabia, PIF, and related entities will continue to be significant players in driving GCC government bonds and sukuk issuance for at least the next three years.