S&P Global Ratings’ latest report titled “Sukuk Outlook 2024: Cautiously Optimistic”, forecasts global sukuk issuance to reach about $160 billion-$170 billion in 2024, from $168.4 billion at year-end 2023 and $179.4 billion in 2022.
The drop in issuance volumes in 2023, which mainly resulted from tighter liquidity conditions in Saudi Arabia’s banking system and Indonesia’s lower fiscal deficit, was somewhat compensated by an increase in foreign currency-denominated sukuk issuance.
Better visibility on the medium-term trajectory of interest rates, particularly toward the end of 2023, benefited foreign currency-denominated sukuk issuance, which increased by a third in 2023, compared with 2022.
“We expect interest rates will remain broadly supportive in 2024. Although the Fed might cut interest rates later than markets expect, financing needs in core Islamic finance countries remain high, given ongoing economic transformation programmes. It is also worth noting that Saudi Arabia and its Vision 2030 programme boosted issuance in 2023 and will continue to do so in 2024.”
Another area of strong growth is sustainable sukuk, whose issuance volumes continued to increase in 2023, albeit from a low base. As Islamic finance remains concentrated in oil exporting countries that aim to reduce their carbon footprints, S&P expects the increase in sustainable sukuk issuance will continue.
“Similarly, we think digitalisation could unlock some opportunities as it could streamline sukuk issuance. Yet, this would require the harmonisation of legal documents band a standardised interpretation of the Sharia.”—Zawya
