Middle East countries raise $46bn through eurobond issuance in first half of 2020

Emerging market sovereign issuance reaches $343bn during the same period, a Moody’s report says

Saudi Arabia is expected to see the biggest rise in sovereign sukuk issuances from the GCC in 2020, Moody's says. AP 

Middle East countries raised $46 billion (Dh169bn) through eurobond issuance in the first half of 2020 accounting for 34 per cent of the total emerging market activity, according to Moody’s Investors Service.

“Governments in the region turned to market issuance to cushion the impact of the coronavirus and oil price slide and fund countercyclical spending,” the ratings agency said.

The UAE topped the region with $15bn in issuance, followed by Saudi Arabia at $12bn, Qatar at $10bn and Egypt at $5bn, according to Moody's latest report. Overall, emerging market eurobond issuance reached $343bn during the first six months of the year.

The world economy is set to slide into its deepest recession since the Great Depression, with the International Monetary Fund projecting a 4.9 per cent contraction this year and a sluggish recovery in 2021.

The economies of the Middle East and Central Asian countries are projected to shrink by an average of 4.7 per cent due to Covid-19 this year, according to the fund.

Oil and gas represented the largest-issuing sector in the first half of 2020, overtaking the real estate sector for the first time since 2017, the report said. Oil and gas and real estate accounted for 26 per cent and 20 per cent of overall issuance.

“Full-year issuance is on course to test all-time highs, as highly rated governments and companies take advantage of normalising financial conditions to raise fresh funding and refinance existing obligations with longer maturities," Moody's said.

"That said, not all issuers will benefit from more favourable conditions. For those lower-down the credit quality spectrum, access to international capital markets is likely to remain challenging,” it said.

Saudi Arabia, the Arab world’s biggest economy, is also planning to raise more money from the sale of stakes in state-controlled entities over the next five years, its finance minister said.

The kingdom is now looking to sell assets in sectors that were previously not targeted for privatisation, such as healthcare and education, as it looks to diversify its revenue base and improve the efficiency of its state entities, Mohammed Al Jadaan said on Wednesday during a Bloomberg webinar. It could raise more than 50bn riyals (Dh48.96bn) through the process.

The report also said sub-Saharan African eurobond issuance has largely dried up, and "a major revival in market borrowing is unlikely given that many countries in the region are facing acute external stress".