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KUALA LUMPUR: Moody’s Investors Service Ltd expects total gross sovereign sukuk issuance, including short-term securities, will recover in 2019 and surpass its record-high volumes of US$93 billion (RM379 billion) reached in 2012, by 2020.
Moody’s vice-president and senior analyst Alexander Perjessy said the international rating agency projects global sovereign sukuk issuance to increase to US$87 billion in 2019 and rise towards US$100 billion in 2020, from US$78 billion in 2018.
“This recovery will be driven by a combination of various sovereigns’ commitments to further sukuk market development, higher sukuk refinancing needs and our expectations of higher budget deficits for the major sovereign sukuk issuers in 2019-2020,“ he said in a report themed “Sovereigns-Global: Sovereign Sukuk Issuance to Recover Amid Moderate Oil Prices and Higher Refinancing Needs” released today.
Perjessy said he expects gross sovereign issuance to also rise further in the medium term as the sukuk issued by Gulf Cooperation Council (GCC) governments begin to mature.
Global gross sovereign sukuk issuance declined 5% to US$78 billion in 2018, from US$82 billion in 2017.
Perjessy said Malaysia has by far the largest stock of outstanding long-term sovereign sukuk worth US$84 billion, followed by Indonesia (Baa2 stable) and Saudi Arabia (A1 stable), with around US$40 billion each.
“The three sovereigns and Qatar (Aa3 stable) have been the most active in promoting the market’s development,“ he said.
He said during 2015-2018, sukuk issues filled nearly 80% of Malaysia’s fiscal deficit financing needs, whereas they covered about a third of Qatar’s and Indonesia’s fiscal deficit and around 14% of Saudi Arabia’s.
Moving forward, Perjessy said Moody’s expects the three largest issuers – Malaysia, Saudi Arabia and Indonesia – to gradually increase their share of sukuk in fiscal deficit financing, further supporting the market’s growth prospects.
“In the medium term, gross issuance will rise further, particularly when GCC sukuk instruments issued after 2016 begin to mature in 2022 and beyond and are refinanced by issuing new sukuk instruments,“ he said.
He added that the Islamic Development Bank (IsDB, Aaa stable) remains by far the largest issuer among the supranationals, with more than US$16 billion of outstanding sukuk at the end of 2018.
