Dubai: International sovereign debt issuances will also support deposits in the banking system. GCC governments will continue raising funding from international markets after record issuance in 2016.
Moody’s expect these debt issuances to reduce the need to borrow from local banks, and the money raised will flow at least partially as deposits into banks.
International sovereign debt issuance from the region increased to $38.9 billion (Dh142 billion) in 2016, from $2.1 billion (Dh7.7 billion) in 2015.
Moody’s project international sovereign issuance from the region at around $32.5 billion in 2017 ($13.6 billion so far in 2017). Large GCC banks with an international footprint are also expected raise international funds.
The low indebtedness of most GCC countries provides some room for the governments to raise international financing. General government debt accounted in December 2016 for 13.4 per cent of the gross domestic product (GDP) in Saudi Arabia, 19.3 per cent in Kuwait 4, 30.5 per cent in Oman, 21.7 per cent in the UAE 53.6 per cent in Qatar and 73.9 per cent in Bahrain. GCC governments increased their international US dollar debt issuances in 2016 to a total of $38.9 billion, compared to $2.1 billion the previous year.
These international sovereign debt issuances have reduced the need for governments to borrow from their local banks and the money raised will flow at least partially as deposits into the banking system. “We expect international sovereign debt issuance from the region to stand at around $32.5 billion during 2017. GCC sovereigns have raised $13.6 billion so far in 2017, including Bahrain’s $600 million and Oman’s $5 billion in February 2017, as well as Kuwait’s $8 billion in March 2017,” said Badis Shubailat, Associate Analyst at Moodys.
Historically, banks in the GCC are heavily reliant on deposits from their government and government related issuers (GRIs). Government deposits accounted for 28 per cent of total deposits in Oman, 26 per cent in Qatar, 23 per cent in the UAE, 19 per cent in Saudi Arabia, 16 per cent in Kuwait and 14 per cent in Bahrain as of December 2016.
