Saudi Arabia's Debt Market: A Growing Powerhouse in the Region

The Saudi Exchange, established its debt market in 2009 to facilitate the listing of corporate Sukuk and Bonds. Since 2018, the market has expanded significantly with the inclusion of several government debt instruments, establishing itself as one of the largest in the region. This growth has been driven by continuous enhancements aimed at encouraging more issuers to list Saudi currency-denominated Sukuk and Bonds.

Recently, the Saudi Exchange approved the listing of government-issued debt instruments valued at SR5.17 billion ($1.37 billion), following a request from the Ministry of Finance. This valuation includes two distinct offerings: Issuance No. 10-01-2024, amounting to SR2.82 billion, and Issuance No. 15-01-2024, valued at SR2.35 billion. Trading for these instruments has commenced on January 22, 2024, aligning with the established listing rules.

This approval marks another milestone in the Saudi Exchange’s ongoing efforts to integrate a diverse range of financial instruments into its trading landscape, further enhancing the dynamism of the financial market.

In a parallel development, Saudi Arabia’s National Debt Management Center concluded its riyal-denominated Sukuk issuance for January 2024, totaling SR8.825 billion. This issuance was divided into three tranches:

• The first, valued at SR3.656 billion, will mature in 2029.
• The second, valued at SR2.822 billion, is due in 2034.
• The third tranche, worth SR2.347 billion, is set to mature in 2039.

Globally, Sukuk issuance is projected to reach between $160 billion and $170 billion in 2024, driven by increased financing needs in key Islamic finance markets, according to a report by S&P Global.

Saudi Arabia’s total outstanding direct indebtedness has seen a consistent rise, reflecting both domestic and external borrowing:

• End of December 2022: SAR 990.1 billion (U.S.$264 billion), with SAR 615 billion (U.S.$164 billion) in domestic debt and SAR 375.1 billion (U.S.$100 billion) in external debt.
• End of December 2023: SAR 1,050.3 billion (U.S.$280.1 billion), with SAR 644.4 billion (U.S.$171.8 billion) in domestic debt and SAR 405.9 billion (U.S.$108.2 billion) in external debt.
• End of June 2024: SAR 1,149.2 billion (U.S.$306.5 billion), comprising SAR 680.3 billion (U.S.$181.4 billion) in domestic debt and SAR 468.9 billion (U.S.$125 billion) in external debt.

In conclusion, the development of Saudi Arabia's debt market represents a pivotal step in the Kingdom's broader economic strategy. By diversifying funding sources, reducing reliance on oil revenues, and attracting foreign investment, the debt market contributes significantly to economic stability and growth. It enhances the efficiency of capital allocation, lowers borrowing costs, and supports the expansion of the financial sector, all of which are essential for achieving the ambitious goals of Vision 2030.

Moreover, the debt market fosters fiscal discipline and transparency, promoting a more resilient and robust economic framework. As Saudi Arabia continues to strengthen its debt market, it not only accelerates its journey toward economic diversification but also builds a more dynamic, sustainable, and competitive economy on the global stage.