By Santhosh V Perumal/Business Reporter
Qatar is not expected to issue any long term debt this year even as the Middle East and North Africa (Mena) region is slated to witness borrowings to tune of $56bn, global credit rating agency Standard & Poor’s has said.
“In general, sovereign debt capital markets are relatively underdeveloped in the Gulf Cooperation Council (GCC) and we do not expect Abu Dhabi, Kuwait, Qatar, or Saudi Arabia to issue long-term debt in 2014,” S&P said in a report.
The rating agency viewed that financing these states’ large investment programmes could result in weaker government balances, but as long as oil prices remain high, it expect them to continue to post fiscal surpluses.
“We expect the majority of borrowing related to these investment programmes to take place at the government-related entity level rather than through central government borrowing,” it said.
However, the rating agency expects that the smaller GCC countries as Oman and Bahrain, along with the smaller emirates of Ras Al Khaimah and Sharjah, will issue commercial debt in the market.
Finding that Ras Al Khaimah issued a $500mn bond under its $2bn sukuk issuance programme (RAK Capital) in 2013, S&P said it expects that it will issue again in 2014 in order to refinance about $0.4bn in debt coming due rather than running down its cash balances.
It expects Sharjah to issue around $0.5bn this year as it continues to invest in capital projects.
Observing that Abu Dhabi is expected to come out with an inaugural issue of treasury bills in 2014, expecting to garner a total of around $1bn; S&P said, given its low sovereign debt stock, Abu Dhabi’s roll-over rate as a percentage of gross domestic product remains very low at below 1%.
Otherwise in the Mena region, S&P said there will be borrowing equivalent of $56bn from long-term commercial sources in 2014. This would be a 27% increase in long-term commercial debt issuance compared with 2013.
About 67% or $38bn of the sovereigns’ gross commercial borrowing will be to refinance maturing long-term commercial debt compared to $25bn in 2013, resulting in an estimated net commercial borrowing of $18bn.
“Consequently, we project that rated Mena sovereigns’ commercial debt stock will reach an equivalent of $462bn by the end of 2014, up 4% from 2013,” it said.
Adding in bilateral and multilateral debt, the total stock would reach $504bn, year-on-year increase of 3%.
Expecting that outstanding short-term commercial debt will reach $145bn at year-end 2014, S&P said the share of non-commercial official debt (bilateral and multilateral) in total sovereign debt is set to fall to 8.7% of total debt as of year-end 2014, from 9.5% in 2013.
“We project that during 2014 the share of commercial sovereign debt rated ‘AA’ or ‘A’ will stand at about 14% of total commercial debt. At the same time, the share of debt rated ‘BBB’ and below is set to account for 86%,” it said.
