GCC bond market pipeline promising; Bahrain, Oman likely next to issue debt

The pipeline for bond issuances by GCC governments looks strong as Oman and Kuwait are expected to be the next countries to issue the debt instrument.

James Swanston, economist for the Mena region at Capital Economics, said following Bahrain's successful $1 billion dollar bond issuance this month, Oman is now reportedly set to follow suit with a $3-$4 billion issuance.

Elsewhere, Kuwait's government is rumoured to be considering passing a long-awaited debt law, which would allow them to issue debt locally and internationally, in an emergency decree if parliament continues to reject it.

"All three countries face the prospect of running large budget deficits this year as the price of oil remains below fiscal breakeven prices," he said.

"While several have turned to dollar bond markets, the big picture is that austerity will remain the order of the day," Swanston added.

Franklin Templeton had said the GCC bond market is expected to hit $100 billion mark this year.
Recently, Abu Dhabi issued a $5 billion multi-tranche bond, while Dubai returned to the market, selling $2 billion in bonds.

Swanston said oil prices suffered a fresh bout of weakness this month amid growing concerns over rising global coronavirus cases, which reinforces Capital Economics view that recoveries in the Gulf will be slow.

The UAE's oil production rose by 0.2 million bpd in August to 2.7 million bpd, pushing it above their 2.59 million bpd of Opec+ quota. But output is still down 12.1 per cent year-on-year, which will weigh on GDP.

Similarly, Saudi Arabia's oil production has been increased in recent months and, in year-on-year terms, the slump in output has eased from more than 20 per cent in June to 13 per cent in August.