Sukuk issuance expected to total $160bln this year

Sukuk issuance expected to total $160bln this year

Global sukuk issuance is forecast to total $160 billion-$170 billion in 2024, including foreign currency-denominated issuance of $45bn-$50bn, according to S&P.

The US-based ratings agency said sustainable sukuk will also continue to contribute to the increase in sukuk issuance, which is still low, while the recently concluded COP28 in the UAE highlighted the role Islamic finance and sukuk can play in addressing climate change.

According to S&P, the potential adoption of the Accounting and Auditing Organisation for Islamic Financial Institutions’ (AAOIFI), a Bahrain-based standard setting body, Sharia standard 62 might reduce issuance volumes over the medium term because it could materially alter the nature and risk characteristics of sukuk instruments.

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 towards the end of 2023, benefited foreign currency-denominated sukuk issuance, which increased by a third in 2023, compared with 2022.

The ratings agency expects 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