GCC reconciliation reopens Qatar’s access to major sukuk investor base: Refinitiv
January 21 2021 10:14 PM

Recent GCC reconciliation has reopened Qatar’s access to its major sukuk investor base – GCC-based Islamic financial institutions, says global financial market data provider Refinitiv.

According to the Islamic Finance Research Division at Refinitiv, the recent reconciliation and ending of the blockade on Qatar have reopened the country’s access to its major sukuk investor base – GCC-based Islamic financial institutions – prompting sukuk issuances from Qatar-based entities.

Issuance from Qatar nearly halved to $2.4bn in 2020 from $5.1bn in 2019.

Total sukuk issuances worldwide set a new record during 2020, reaching a total of $172.1bn, compared to $169.1bn issued in 2019, according to Refinitiv.

Sukuk issuances saw strong momentum during the first nine months of 2020 as Covid-19 lockdown measures and a crash in oil prices prompted a ramp-up in sovereign issuance in key sukuk markets. This was to finance sweeping stimulus packages aimed at alleviating the economic impact of the pandemic.

However, issuance slowed significantly during the fourth quarter (Q4) as GCC governments, and particularly Saudi Arabia, reduced their borrowing, Refinitiv said.

Excess borrowing in previous quarters and fiscal measures taken to narrow deficits reduced the need of GCC sovereigns to tap capital markets during the last quarter of 2020, it said.

The economic ramifications of Covid-19 resulted in wider fiscal deficit and, in turn, higher combined financing requirements of $180bn in 2020, pointed out Zawya, which provides business intelligence and news.

GCC governments had collectively issued $105.7bn in debt, of which $41.2bn came from sovereign sukuk – a new record for GCC sovereign sukuk issuance.

Sukuk issuances are expected to pick up further momentum during 2021, with an eye on some active and first-time issuers tapping the sukuk market, Zawya noted.

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