Despite a slowdown in global sukuk issuances from core markets during the first quarter, the pipeline for the Islamic bonds is building up for Q2, according to Fitch Ratings. Sukuk issuance from core markets in Q1 was $45.3 billion, down 18.5% quarter on quarter. “Persistent macro volatilities and uncertainties, contraction in global liquidity and investor risk appetite, and monetary tightening is affecting sukuk and bond issuance in regions where Islamic finance is active,” said Bashar Al-Natoor, Global Head of Islamic Finance at Fitch.
“However, Islamic investor’s liquidity and investment appetite continues to be supportive of the longer-term sukuk story,” Bashar noted. The agency said while rising oil prices following the OPEC+ production cut will reduce new financing needs for many oilexporting sovereigns, a number of core oil-importing countries, like Malaysia, still have funding needs and are expected to have budget deficits in 2023. Last month, credit rating agency, Moody’s Investors Service, announced that improved fiscal positions of energyexporting issuers like Saudi Arabia will help stabilise longterm sovereign sukuk issuance at around $80 billion in 2023 and $80 billion to $85 billion in 2024.
The macroeconomic situation will continue to boost fiscal balances of energy-exporting sovereign sukuk issuers, with most Gulf Cooperation Council (GCC) region countries recording budget surpluses in 2023- 2024. “Consequently, GCC issuance in 2023 will be mainly driven by governments’ decisions to refinance or repay maturing sukuk using surplus funds,” said Alexander Perjessy, the vice president and senior credit officer at Moody’s.