Sukuk issuance to decline in 2024: Moody's

Global long-term sovereign and supranational sukuk issuance volumes will fall again this year, extending the decline since issuance peaked in 2020, before rebounding slightly in 2025, according to Moody's Investor Service.

'Global sovereign long-term sukuk issuance volumes, including all issuances by national governments and multilateral development banks with a tenor of more than one year, have declined from a peak of $114bn in 2020 and are unlikely to return to this level over the next several years,' Moody's said in a new report.

The rating agency expects issuance activity in the sovereign long-term sukuk market to decline to $86bn in 2024, before rebounding slightly in 2025. Moody's said that the sukuk issuance volumes will drop 6% this year.

Saudi Arabia will lead the decline, along with Malaysia. A sizable drop in Saudi Arabia's domestic sukuk issuances reflects a shift in the government's funding strategy.

'Based on the assumption that oil prices average around $80 per barrel for the Brent crude benchmark during 2024-2025, we expect the net aggregate financing needs, or the combined fiscal deficit, of key sovereign issuers to increase very modestly over the next two years, compared with 2023,' Moody's said.

As per Moody's forecasts, net financing needs will rise to $162bn in 2024 and $157bn in 2025 from an estimated $148bn in 2023. This increase, combined with a modest increase in the sukuk repayment schedule, could support sukuk issuance volumes. However, Moody's expects country-specific factors to lead to another small issuance decline in 2024.

Moody's said that new issuers are continuing to broaden the global sovereign sukuk market, while established issuers expand their sukuk programmes.