Expect a global recovery in sovereign sukuk issuances this year: Sovereign sukuk issuances will stage a recovery this year to reach USD 87 bn, up from USD 78 bn in 2018 when they declined, Moody’s rating agency says in a new report. This figure will rise again in 2020 toward USD 100 bn, beating the current record (USD 93 bn) for annual issuance volumes. The agency said that increasing needs for deficit financing and a higher sukuk maturity rate will mean that governments are likely to boost the total net issuance. “In the medium-term, gross issuance will rise further as the sukuk issued by the GCC governments begin to mature and are refinanced via a new issuance,” said Alexander Perjessy, VP and senior analyst at Moody’s.

Movements in the oil markets will play a large part in the accuracy of Moody’s latest forecasts, which used an average price of USD 75 bbl over the year. Lower prices will result in widening deficits among oil-producing countries such as Saudi Arabia and Qatar, which may force them to increase sukuk issuances. The opposite occurred last year, when issuances experienced a 5% slowdown, dropping to USD 78 bn from USD 82 bn the previous year. Higher oil prices eased pressure on deficits and reduced the need to debt finance.