Sukuk issuance in Qatar rose 122 percent year-on-year to $500 million, while bond issuance increased by 59 percent to $12.4 billion during the first half of 2024, stated Fitch Ratings in its latest release.

Qatar’s debt capital market issuance is expected to be broadly stable amid the government’s continued debt repayments and limited corporate market access. Fitch also expects bank issuances to continue as they replace upcoming maturities and strive to diversify their funding bases.

Qatar diversifies issuances

Qatar’s debt capital market reached about $130 billion outstanding at the end of H1 of 2024 with sukuk at 10 percent. Since the start of 2024, the diversity of issuances in Qatar has increased, with the issuance of the first sovereign green bond in the GCC region, the first Qatari riyal corporate sukuk, and a Formosa bond.

Besides, Qatar’s debt capital market is the third-largest in the GCC after Saudi Arabia and the UAE. The sovereign holds the majority of the market and most Qatari banks have also issued senior unsecured debt to extend their maturity profiles and diversify funding.

Corporate issuances have been small. The majority of the debt capital market outstanding were denominated in U.S. dollars at 65 percent, followed by riyals at 30 percent. About 9.1 percent of the debt capital market issuances have maturities in the second half of the year, 13.4 percent in 2025, and 77.5 percent in 2026 and beyond.

Qatar advances ESG sukuk, bonds

Qatar has taken steps to advance the still-developing debt capital market in recent years. However, challenges remain including the emerging riyal debt capital market and the concentration of the investor base in banks. In addition, most corporates in Qatar prefer bank financing over bonds or sukuk issuances.

Despite this, the Qatar Central Bank (QCB) seeks to boost sustainable finance and develop ESG sukuk and bonds. ESG debt in Qatar reached $3.8 billion during H1 of 2024 with sukuk at 19.5 percent. The inclusion of sukuk issuances will attract investors seeking Shariah-compliant, ESG options. These initiatives also seek to enhance Qatar’s appeal to global investors who prioritize sustainability.

During H1 of 2o24, Fitch rated about $3.2 billion of Qatar’s sukuk issuance ‘A’. Moreover, it has recently upgraded Qatar’s rating to ‘AA’ with a stable outlook, the highest credit rating among the GCC countries.

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External debt to decline

The Qatar government has been repaying external debt as it matures. Debt decreased by $7.4 billion in 2023. Fitch projects the country’s debt/GDP to fall to about 48 percent of GDP in 2024 and 46 percent in 2025, from a peak of 85 percent in 2020.

“This reflects our expectation that the government will continue to repay maturing external debt in 2024 ($4.8 billion), but is likely to refinance its $2 billion 2025 maturity in 2024, and will gradually pay down some of its domestic debt,” added the ratings agency.

“We forecast Qatar’s general government budget surplus at about 8.6 percent of GDP in 2024 (2023: 9.3 percent of GDP),” Fitch noted.

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