Global sukuk issuance is likely to reach about $190 billion to $200 billion in 2025, with foreign currency-denominated issuance contributing $70 billion to $80 billion, S&P Global Ratings said in a report published today.
The report ‘Sukuk Market: Strong Performance Set To Continue In 2025’ notes that total sukuk issuance amounted to $193.4 billion at year-end 2024, slightly down from $197.8 billion a year earlier but with a significant increase in foreign currency-denominated issuance.
“Our forecasts assume no disruption from new standards, no major shift in global liquidity compared with our base-case expectations, and no major increase in geopolitical risk in the Gulf Cooperation Council (GCC) region that could derail the economic performance of top issuers’ countries of domicile,” said S&P Global Ratings Islamic finance head Mohamed Damak.
Read: GCC debt capital market hits $1 trillion with 40 percent as sukuk, says Fitch
Improving conditions
The report added that many issuers wanted to benefit from the improving global liquidity conditions in 2024, with major central banks starting to ease their monetary policy and avoid any potential disruption that could come from local or geopolitical developments.
It also expects monetary easing to continue in 2025, though at a slower pace.
“This, combined with high financing needs in core Islamic finance countries due to ongoing economic diversification programs, will lead issuers to take any windows of opportunity to issue in the market,” the report said.
Local currency dominated issuance drops
Local currency-denominated sukuk issuance fell by 14.6 percent year on year, primarily due to lower issuance in Malaysia, Pakistan, Turkiye, and Indonesia.
The largest drop in local-currency issuance was in Malaysia, where government issuance decreased because of a smaller fiscal deficit due to the reduction of subsidies. Similarly, Malaysia’s central bank’s issuance fell as a result of tighter liquidity conditions for the Islamic banks as their financing growth continued to outpace deposit growth.
Pakistan also saw lower local-currency issuance, as the government’s fiscal position remains under pressure and monetary conditions remain tight, as did Turkiye, where tight monetary conditions resulted in lower local currency-denominated issuance. However, local-currency issuance in Saudi Arabia resumed its growing trend as the government tapped the market with jumbo issuance and started issuing retail sukuk.
Foreign currency-denominated issuance rises
Significant financing needs in core Islamic finance countries and improving liquidity conditions, with major central banks starting monetary easing, led to a surge in issuance on the international sukuk market in 2024. Many issuers also wanted to avoid any potential disruption that could come from local or geopolitical developments. Overall, total issuance in foreign currency rose to $72.7 billion in 2024 from $56.5 billion in 2023.
The increase was mainly attributable to the GCC, Malaysia and Indonesia. Among GCC countries, Saudi Arabia and Kuwait led the way, with banks, corporations and the government of Saudi Arabia stepping up their foreign-currency issuance, while banks and corporations in Qatar and Oman were also more active in this area. The UAE ended the year with marginally lower foreign-currency sukuk issuance than last year. In Malaysia, performance was mainly underpinned by increased issuance by the International Islamic Liquidity Management Corporation (IILM) and a couple of issuances by the central bank and the sovereign wealth fund. Indonesia’s higher sukuk volumes were due to the country’s increased sovereign issuance.
