Today's Edition
A.SREENIVASA REDDY (ALETIHAD)
Sukuk issuance will amount to $190 billion to $200 billion in 2025, continuing the strong performance of 2024, according to a forecast by S&P Global Ratings.
The global sukuk market demonstrated resilience in 2024, with total issuances reaching $193.4 billion, slightly lower than the $197.8 billion recorded in 2023.
A key highlight was the significant 29% rise in foreign currency-denominated sukuk issuance, which reached $72.7 billion by the end of 2024. This growth was driven by strong participation from issuers in Malaysia, Gulf Cooperation Council (GCC) countries, particularly Saudi Arabia, and Indonesia. However, local-currency sukuk issuances declined by 14.6% due to tighter fiscal and monetary conditions in some core markets like Malaysia, Pakistan, Türkiye, and Indonesia.
In 2025, sukuk issuance is expected to maintain robust levels, with total volumes projected to range between $190 billion and $200 billion. The continuation of monetary easing by major central banks and the high financing needs in Islamic finance core countries, driven by ongoing economic diversification programmes, will likely underpin this performance. Foreign currency-denominated sukuk issuance is anticipated to remain elevated, contributing $70 billion to $80 billion.
In 2024, many issuers capitalised on improved liquidity and easing monetary policies by central banks. These conditions are expected to persist into 2025, creating favorable issuance opportunities. “In 2025, not only do we expect monetary easing to continue but we also think financing needs in core Islamic finance countries will remain high and lead issuers to take any opportunity the market has to offer,” the S&P Global Ratings report said.
Issuers are increasingly tapping into international markets to attract foreign capital and mitigate potential disruptions from local or geopolitical developments.
Saudi Arabia and Kuwait led foreign currency sukuk issuance in the GCC, with active participation from banks, corporations, and governments. Malaysia saw increased contributions from its International Islamic Liquidity Management Corporation, central bank, and sovereign wealth fund. Indonesia’s higher volumes were primarily due to increased sovereign issuances.
Conversely, local-currency sukuk issuance declined 14.6% in 2024. The largest drop in local-currency issuance was in Malaysia, where government issuance decreased because of a smaller fiscal deficit. Pakistan’s fiscal pressures and Türkiye’s tight monetary policy also contributed to declines in local-currency sukuk issuance. However, Saudi Arabia resumed its growth trajectory with large-scale government sukuk issuances and the introduction of retail sukuk.
Sustainable sukuk issuance remained stable, with volumes reaching $11.9 billion in 2024. This segment primarily comprised sustainability sukuk, which fund projects with both environmental and social benefits. Growth in this area may accelerate as core Islamic finance countries advance their net-zero and renewable energy goals.
Sustainable sukuk accounted for about 25%-30% of the the Middle East's sustainable issuance in 2024. Although volumes in this category are expected to remain steady at $10 billion to $12 billion in 2025, further growth depends on the acceleration of climate transition initiatives and regulatory incentives in Islamic finance markets.
Saudi Arabian issuers contributed the highest share of total sustainable sukuk issuance, at 38%, in 2024, underpinned primarily by Saudi bank issuance. Indonesia was the second-largest market thanks to sovereign issuance. While the volume of sustainable sukuk issuance in the UAE fell by 60% compared with the 2023 figure, which was boosted by COP28-related activity, the country still contributed 15% of the overall issuance volume, the S&P Global Ratings report said.
