ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Money market

Global Islamic bond issuance to hit record in 2020, Moody's says

Indebted governments of Muslim-majority nations to drive market past $93bn mark

According to the credit rating agency, the recovery will be supported by the financing demand for fiscal deficit and scheduled refinancing of Islamic bonds.    © Reuters

KUALA LUMPUR -- The global issuance of sovereign Islamic bonds is expected to exceed a seven-year-old record by 2020, Moody's Investors Service said in a report issued on Tuesday.

The recovery will be supported by the governments of Muslim-majority nations that are running fiscal deficits and need to pay off previous issues with new Islamic bonds, according to the credit rating agency.

The gross issuance in 2018, including long and short-term issues by governments and international organizations, fell 5%, to $78 billion, as higher oil prices partially alleviated the need for financing. The number is a far cry from the record of $93 billion hit in 2012.

Of the combined 2018 issuance, long-term securities made up $54.8 billion. Gulf Cooperation Council member countries issued $22.1 billion of this total, Malaysia $15.5 billion and Indonesia $10.6 billion.

Moody's expects Malaysia, Saudi Arabia and Indonesia to increase their share of the combined issuance as they finance fiscal deficits over the next two years.

Malaysia, a key promoter of Islamic financial tools, relied on Islamic bonds, also known as sukuk, to finance 80% of its fiscal deficit spending in the three years through 2018, the report says. Malaysians elected a new leader in May, and the government now in power has made commitments to fulfill electoral promises. As a result, Malaysia's fiscal 2018 deficit is now expected to be 3.7% of gross domestic product, up from an initial estimate of 2.8%.

The sukuk market, also backed by demand from Islamic financial institutions for Shariah-compliant securities, is considered more stable than that for conventional bonds, according to the report. "A deepening of the global sukuk market will allow sovereigns to diversify further their sources of financing," it says.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more