GCC states contribute 35% of emerging-market USD debt issued in Q1 ‘25

Gulf Cooperation Council (GCC) countries contributed over 35 per cent of all emerging-market (excluding China) US dollar debt issued in Q1 2025, up from 25 per cent in 2024, according to Fitch Ratings.

The region’s debt capital market (DCM) exceeded USD1 trillion in outstanding volume, driven by funding diversification, project financing, and fiscal deficits.

Despite the growth, GCC markets remain fragmented, with Saudi Arabia and the UAE the most developed. Other members face challenges, including limited foreign investor access due to the absence of links to global securities depositories.

Issuance slowed after early April but is rebounding, with a healthy pipeline and strong regional and Islamic liquidity. Saudi Arabia holds the largest share of DCM debt at 45.1 per cent, followed by the UAE (29.9 per cent) and Qatar (13 per cent).

Sukuk accounts for 40 per cent of the GCC DCM, though issuance dropped 51 per cent year-on-year (YoY) to USD18.2 billion in Q1 2025. In contrast, bond issuance rose 29 per cent. ESG-linked instruments have now surpassed USD50 billion.

Falling oil prices—forecast at USD65 per barrel for 2025 and 2026—pose risks to fiscal revenues, particularly in Bahrain and Saudi Arabia, though Qatar, Kuwait, and Abu Dhabi are better shielded by large assets.

Fitch expects GCC central banks to follow projected US Federal Reserve rate cuts to 4.25 per cent by year-end. Most Fitch-rated GCC sukuk remain investment-grade, with no defaults recorded in 2024 or Q1 2025.

Kuwait recently passed a key financing law to enable more public debt, while the UAE is expanding dirham-based issuance—now 24.9 per cent of its DCM—and advancing sustainable finance initiatives.

Attribution: Amwal Al Ghad English

Subediting: M. S. Salama