SUKUK ISSUANCE MAY TOP US$93B BY 2020

Moody’s expects pick-up this year on back of high deficit financing and refinancing needs

SOVEREIGN sukuk issuance will recover this year and surpass its record-high volumes by next year, after declining five per cent last year, says Moody’s Investors Service.

The rating agency said global gross sovereign sukuk issuance declined to US$78 billion (RM319 billion) last year from US$82 billion in 2017, but expected it to pick up this year.

This will be on the back of high deficit financing needs amid moderate oil prices, more sukuk refinancing demand, especially in Malaysia, and as major issuers gradually increase the share of total net sukuk issuance.

“By 2020, we expect total gross sovereign sukuk issuance, including short-term securities, to surpass the all-time high of US$93 billion reached in 2012.

“In the medium term, gross sovereign issuance will rise further as the sukuk issued by Gulf Cooperation Council governments begin to mature,” Moody’s said yesterday.

The rating agency said commitment to sukuk market development would drive deepening in global sovereign sukuk market.

Malaysia has by far the largest stock of outstanding long-term sovereign sukuk at US$84 billion, followed by Indonesia and Saudi Arabia, around US$40 billion each.

The three sovereigns and Qatar had been the most active in promoting the market’s development, said Moody’s.

“During 2015-2018, sukuk issues filled nearly 80 per cent of Malaysia’s fiscal deficit financing needs whereas they covered about a third of Qatar’s and Indonesia’s fiscal deficit and around 14 per cent of Saudi Arabia’s,” it said.