Funding Needs and Upcoming Maturities to Drive Sukuk Issuance

Sovereign sukuk issuance momentum is likely to be driven by the need to diversify funding and meet upcoming maturities, along with intact investor appetite, Fitch Ratings says in a new report. Although less pandemic-related support, economic recovery and higher oil prices could result in lower financing needs for sovereigns, we expect one-off or infrequent issuance to support 2021 volumes.

Fitch estimates total sovereign sukuk issuance rose by 29% to USD75 billion in 2020 for Bahrain, Indonesia, Malaysia, Oman, Saudi Arabia and Turkey, usually the main sukuk-issuing sovereigns. A sharp increase in financing requirements contributed to record sukuk issuance by the six in 2020. After three years of growth, Fitch estimates that sukuk fell to 26% of market financing in 2020 from 30% in 2019.

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