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RIYADH: Saudi Arabia’s sukuk and bond issuances rose 2.8 percent year on year in value by the end of the final quarter of 2023, reaching about SR758.8 billion ($202.34 billion), data issued by the Saudi Exchange showed.

A recent Tadawul report attributed the growth to an increase in the listed sukuk and bonds issued by the government, constituting 70 percent of the total at SR529.8 billion.

Saudi investors held approximately 99 percent of the listed holdings, with a traded value of SR5.44 billion in the fourth quarter of 2023, while Gulf Cooperation Council investors contributed 0.2 percent with a traded value of SR3.96 billion. The remaining 0.8 percent was distributed among foreign investors.

Saudi Arabia is focused on advancing its capital market by encouraging the private sector’s involvement and attracting foreign institutional investors to support key projects in the country.

The ratio of bonds and sukuk issuances to gross domestic product was 19.05 percent, showing a slight decrease from 20.71 percent in the corresponding period of the previous year.

While government issuances dominated the listed debt instruments at 96 percent, unlisted bonds, and sukuk were equally divided between the government and corporate issuances, contributing 27.5 percent to the total.

Issuances of government-listed sukuk and bonds grew by 5.14 percent during this period, whereas corporate issuances reached only SR20 billion, reflecting a decline of 6.35 percent.

Sukuk are Shariah-compliant financial certificates through which investors gain partial ownership of an issuer’s assets until maturity. While bonds are financial certificates through which investors lend money to the issuer, indicating an obligation for repayment at maturity.

Bondholders receive regular interest payments, while sukuk holders receive a share of the profit generated by the underlying asset.

Listed bonds and sukuk issuances accounted for 13.81 percent of the GDP, reflecting a marginal decline from 14.74 percent in the corresponding quarter of 2022. Meanwhile, unlisted debt instruments comprised 5.16 percent of the GDP, down from 5.63 percent.

The Saudi Exchange launched its debt market in 2018 with the listing of several primary and secondary government debt instruments. The bourse’s debt market has since grown into one of the largest in the region and several enhancements have been made.

According to the Tadawul report, approximately 86 percent of the listed issuances primarily consist of fixed interest rates, while unlisted issuances comprise 67 percent with fixed rates and 33 percent with floating interest rates.

The top 3 market participants in the last three months of 2023 were Riyad Bank, SNB Capital, and Al Rajhi Capital. Almost all unlisted holdings lie with Saudi investors with a traded value of SR238 million in the final quarter of 2023

In January, the National Debt Management Center of Saudi Arabia released its Annual Borrowing Plan Report for 2024, presenting the Kingdom’s financing strategies for the upcoming year.

The report highlighted the accomplishments of 2023, serving as a robust basis for the Kingdom to uphold fiscal stability and leverage opportunities in the coming year. Saudi Arabia remains committed to maintaining a conservative debt-to-GDP ratio, aiming to prevent excessive borrowing costs on its financial system and preserving flexibility for future borrowing needs.

Accoding to economist Talaat Hafez, the Kingdom’s commitment to a robust and sustainable debt profile is emphasized by its strategic debt management initiatives, careful risk management approach, and investor relations strategy.

“Saudi Arabia’s high credit rating with a positive outlook from Fitch, Moody’s, and S&P reflects its strong credit position. This rating has bolstered the Kingdom’s financial capacity and demonstrated a steadfast commitment to meeting loan payments without default,” Hafez added.