Saudi Arabia’s National Debt Management Center Closes June Sukuk Program with SR2.5 Billion Bid Amount
Saudi Arabia’s National Debt Management Center (NDMC) has announced the closure of the riyal-denominated sukuk program issuance for June. The total bid amount received was SR2.5 billion ($667 million), and the total amount allocated was SR7.43 billion. The sukuk issuance was divided into tranches, with the first tranche having a size of SR622 million maturing in 2030, and the second tranche valued at SR1.84 billion maturing in 2035.
Sukuk is an Islamic bond, a debt product issued according to Shariah or Islamic laws. The NDMC’s website stated that this issuance confirms the NDMC’s statement in the mid of February of this year that it will continue, in accordance with the approved Annual Borrowing Plan, to consider additional funding activities subject to market conditions and through available funding channels locally or internationally.
The purpose of this issuance is to ensure the Kingdom’s continuous presence in debt markets and manage the debt repayments for the coming years while considering market movements and the government debt portfolio risk management, the statement added.
According to an S&P Global report released in January, global sukuk issuances are expected to continue declining in 2023 to about $150 billion compared to $155.8 billion in 2022 and $170.4 billion in 2021.
What is Sukuk?
Sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Shariah or Islamic law. Sukuk is an investment certificate that represents ownership in an asset or a pool of assets. The asset can be tangible, such as real estate or infrastructure, or intangible, such as intellectual property rights or revenue streams from a project.
Sukuk is a debt product issued according to Shariah or Islamic laws. Sukuk holders receive a share of the profits generated by the underlying asset, rather than interest, which is prohibited in Islam. Sukuk is structured to comply with Shariah principles, which require that investments be made in ethical and socially responsible activities.
Sukuk is a popular investment vehicle in the Islamic finance industry, which is growing rapidly worldwide. The sukuk market has seen significant growth in recent years, with issuances increasing from $42 billion in 2010 to $170.4 billion in 2021.
Saudi Arabia’s Sukuk Program
Saudi Arabia’s sukuk program is part of the Kingdom’s efforts to diversify its sources of funding and develop its capital markets. The NDMC manages the Kingdom’s debt issuance program, which includes both conventional bonds and sukuk.
The sukuk program is an important tool for the Kingdom to raise funds for its development projects and manage its debt repayments. The sukuk program has been successful in attracting local and international investors, who are interested in investing in Shariah-compliant instruments.
The NDMC’s sukuk program issuance for June was well-received by investors, with a total bid amount of SR2.5 billion. The sukuk issuance was divided into tranches, with the first tranche having a size of SR622 million maturing in 2030, and the second tranche valued at SR1.84 billion maturing in 2035.
The NDMC’s website stated that this issuance confirms the NDMC’s commitment to continue considering additional funding activities subject to market conditions and through available funding channels locally or internationally. The purpose of this issuance is to ensure the Kingdom’s continuous presence in debt markets and manage the debt repayments for the coming years while considering market movements and the government debt portfolio risk management.
Outlook for Sukuk Issuances
The sukuk market is expected to continue growing in the coming years, driven by the increasing demand for Shariah-compliant investments and the growing interest in Islamic finance worldwide. The sukuk market has seen significant growth in recent years, with issuances increasing from $42 billion in 2010 to $170.4 billion in 2021.
According to an S&P Global report released in January, global sukuk issuances are expected to continue declining in 2023 to about $150 billion compared to $155.8 billion in 2022 and $170.4 billion in 2021. The decline is attributed to the expected normalization of monetary policies in advanced economies, which could lead to higher interest rates and lower liquidity in emerging markets.
However, the sukuk market is expected to remain resilient, supported by the increasing demand for Shariah-compliant investments and the growing interest in Islamic finance worldwide. The sukuk market is also expected to benefit from the increasing number of issuers, including sovereigns, corporates, and financial institutions, who are interested in tapping into the growing demand for Shariah-compliant investments.
Conclusion
Saudi Arabia’s National Debt Management Center has announced the closure of the riyal-denominated sukuk program issuance for June, with a total bid amount of SR2.5 billion. The sukuk issuance was divided into tranches, with the first tranche having a size of SR622 million maturing in 2030, and the second tranche valued at SR1.84 billion maturing in 2035. The purpose of this issuance is to ensure the Kingdom’s continuous presence in debt markets and manage the debt repayments for the coming years while considering market movements and the government debt portfolio risk management.
The sukuk market is expected to continue growing in the coming years, driven by the increasing demand for Shariah-compliant investments and the growing interest in Islamic finance worldwide. The sukuk market is also expected to benefit from the increasing number of issuers who are interested in tapping into the growing demand for Shariah-compliant investments. Despite the expected decline in sukuk issuances in 2023, the sukuk market is expected to remain resilient, supported by the increasing demand for Shariah-compliant investments and the growing interest in Islamic finance worldwide.