More debt issuance to cover deficits

Debt issuance remains the main source of deficit financing for the region’s oil-exporting countries.

Many GCC countries continue to issue debt to meet their budget financing needs. Countries with market access have tapped significant amounts from international markets in the first half of 2017, GCC countries issued some $30 billion (Dh110 billion), as conditions in international financial markets remain favourable.

While issuing internationally avoids crowding out credit to the private sector, especially given limited capacity of domestic financial markets. However, issuing domestically can help support gradual financial market development (for example, Saudi Arabia). Greater reliance on domestic financing would also reduce the consequences of a deterioration in international market conditions. In some instances, countries have tapped international markets to rebuild buffers.

In general, the IMF said, borrowing and investment decisions should be made as part of a comprehensive asset-liability management strategy that takes into account macro-financial developments and risks. To help support that approach, debt management offices have been established in Kuwait, Oman, and Saudi Arabia and strengthened in Abu Dhabi and Dubai. The IMF said risks can be reduced by issuing longer maturity debt, for example, Oman issued a 30-year bond in March 2017