Saudi Arabia is looking at several initiatives to attract more foreign investors to its sukuk and debt capital market.

One of the options being considered is the removal of a 5% tax applied to interest payments on debt instruments, the regulatory body said in an April 2024 report.

“Witholding tax costs (5%) are unattractive and discouraging for foreign institutional investors,” noted the report.

The CMA is also looking at expanding the availability of debt instrument funds and running awareness sessions to engage a broad investor base.

It is also considering institutionalising market-makers and encouraging brokers to provide electronic trading services.

The debt capital market in Saudi has a potential to reach 18% of the gross domestic product (GDP) by 2030. Saudi Arabia’s sukuk and debt capital market grew by 7.9% annually since 2019, according to CMA.

The size of the corporate sukuk and debt capital market reached SAR 125 billion by the end of 2023, up from SAR 95 billion by the end of 2019. The number of companies offering debt instruments has also tripled by the end of 2023 compared to the end of 2019.

The CMA said it is indeed looking to unify efforts and set strategic directions to develop the market.

“A thriving debt market is essential for contributing to the growth of the economy and its activities,” it said.

It cited the “significant importance” of the market as a “fundamental element” in Saudi Arabia’s economic growth.

(Writing by Cleofe Maceda; editing by Seban Scaria)