The uptick in MENA Eurobond issuances – A sign of things to come?

GCC sovereigns and quasi-sovereigns have been active in Eurobond issuance to fund projects aimed at economic diversification as part of their respective countries’ Vision targets. With lower oil prices and OPEC+ production cuts, the countries are turning to debt markets to finance developmental projects. In addition, upcoming maturities and need to fund budget deficits are also driving bond issuances. Relatively high yield, large reserves, strong creditworthiness and low currency risk make issuances from GCC players more attractive for investors. GCC countries and Egypt would also have to refinance the USD 55 billion of debt maturing in 2025(1).  Countries like Egypt and Morocco have also issued Eurobonds in early 2025. While Egypt has reportedly raised debt to maintain FX liquidity and meet budget deficit, Morocco has raised funds to meet spending needs for World Cup 2030.

Strong Q1 2025 for MENA fixed income issuances

Q1 2025 had been an active quarter for MENA bond issuances, hitting a record high of USD 53.5 billion, an increase of 27% y/y. The number of issues had been over 60, marking a 29% y/y increase. The tally is also the highest over the years for the first quarter of a year (2).  Oil price is estimated to average USD 68/barrel in 2025 by the EIA, below the fiscal break-even price for countries like Saudi Arabia which would require average oil price at USD 90 per barrel. This would in turn increase the countries’ funding needs. Based on the activity levels and funding needs, issuers are likely to lock in favourable conditions. In addition to demand from MENA investors, foreign investors have also exhibited strong interest. For example, Government of Sharjah’s EUR 500 million (USD 521 million) bond issuance in February 2025 was oversubscribed 3.4 times. 45% of the subscription was from U.K investors while 26% was from MENA. Ras Al-Khaimah’s USD 1 billion issuance in March 2025 saw 57.8% allotted to investors from MENA, 35% from the U.K and continental Europe and 7.2% from Asia and others.

Source: LSEG

Sukuk issuances have also witnessed a notable uptick in recent years, MENA issuers raising USD16.78 billion during Q1 2025, according to LSEG (3).  While this is the highest amount raised in first quarter over the years, sukuk issuances had made up 31% of total bond proceeds in Q1 2025, compared to 40% in Q1 2024. Some key sukuk issuance in Q1 2025 were from Ma’aden (USD 1.25 billion), RAK Capital (USD 1 billion), BAPCO Energies (USD 1 billion). While Ma’aden’s issuance was oversubscribed by 9.2 times, those of RAK Capital and BAPCO were oversubscribed by 4.4 times and 4 times respectively, indicating strong investor demand. While sukuk issuance from the region had dipped in 2022 to USD 12.2 billion amid improved oil prices, it has recovered since. MENA sukuk issuances in 2023 had been at USD 32.0 billion and reached a record high of USD 46.4 billion in 2024. As sukuk issuances provide a means to tap into the liquidity available with issuers who seek Sharia compliant investments and given the funding demands of the region, sukuk issuances are likely to make up significant part of the total issuances.

From a pricing perspective, regional issuers had been able to price bonds competitively during the issuance, with spreads tightening by as much as 63 bps (Egypt) from their initial price guidance. Egypt’s USD 1.25 billion senior unsecured Reg S bond issued in January 2025 had a yield to maturity of 8.625%, while the initial price expectations placed the yield at around 9.25%. Other bond issuances such as those from Morrocco, RAK Capital, Qatar etc. have also seen spreads tighten by over 30 bps from their initial price guidance. Saudi Arabia’s EUR 1.5 billion 7-year note issued in February 2025 was priced at mid-swaps plus 115 bps, 40 bps tighter than the initial price guidance.

Key development initiatives from GCC sovereigns

Saudi Arabia and UAE are some notable examples of countries taking steps to develop their local bond market and all three factors – fiscal, regulatory and investor base development have contributed to their development. The countries have launched specific programs towards this end - Saudi Riyal Local Sukuk Program (2017) and UAE’s T-Bonds issuance programme (2022) and T-Sukuk Issuance Programme (2023). 

Under its Saudi Riyal Local Sukuk Program, Saudi Arabia has raised SAR 280 billion (USD 74.6 billion) over 2018-March 2025 (4).  While banks had been the key investors, there has been increasing interest from foreign investors, who had invested 5.8% of the amount raised in 2024 compared to no investors in 2018. Under its T-Bonds and T-Sukuk program, UAE has raised AED 28.2 billion (USD 7.68 billion), with AED 11.2 billion in bonds (USD 3.1 billion) and AED 17.1 billion (USD 4.7 billion) in sukuk. The instruments are seeing strong demand with the issuance of AED 1.1 billion (USD 300 million) in January 2025 being oversubscribed by as much as 6.3 times.

Kuwait is largely expected to expand its local currency debt market in the backdrop of passage of local debt law and the need for funding developmental projects under Vision 2035 amid prevailing lower oil price environment relative to the country’s estimated fiscal breakeven price of USD 90.5 barrel for FY 2025/26. Egypt is also expected to raise EGP 3.6 trillion (USD 70 billion) in domestic issuance in FY 2025/26, up from EGP 2.8 trillion (USD 54 billion) in FY 2024/25.

Incorporation of ESG

MENA issuers have begun to incorporate ESG themes in their Eurobond issuances. For example, Saudi Arabia’s USD 9.27 billion Eurobond issuance in February 2025 included a green tranche for USD 5.90 billion which is a 7-year bond maturing in 2032. The bond was received well by the investors with bids received totalling to about USD 8.2 billion. This was the country’s first sovereign green issuance and the proceeds from the issuance would be used finance eligible green projects in line with its Green Financing Framework. Saudi Arabia had published its green financing framework in March 2024, under which the country would issue green bonds/sukuk. The framework covers details such as use of proceeds and process of evaluation of projects that would meet the green financing criteria. Other countries such as UAE, Oman, Turkey, Egypt have similar green/sustainable financing frameworks and countries like Turkey, Egypt have already issued green bonds.

GREs like Masdar, DP World, SWFs like Saudi’s Public Investment Fund (PIF) also have sustainability related frameworks and have followed it up with related issuances. Masdar issued USD 750 million green bond in 2023 and USD 1 billion green bond in 2024. DP World issued USD 100 million blue bond in December 2024 to fund sustainable projects in the maritime sector, making it the first blue bond issuance in the MENA region. PIF debuted green bond issuance as early as 2022, raising USD 3 billion to finance green investments.

Implications for Investment banks across the region

MENA region has generated investment banking fees of USD 372.2 million in Q1 2025, increasing by 25% y/y, according to LSEG. Of this USD 152.4 million had been from debt capital markets, an increase of 6% y/y. GCC countries’ debt had made up over 25% of EM US Dollar issuance and GCC sukuk made up 40% of global sukuk in 2024. Given the positive outlook on debt issuances from the region, it provides significant opportunity for both regional and global investment banks.

Way forward

Considering the funding needs of MENA countries in the near future and the strong investor demand from regional and foreign investors, the uptick in fixed income issuances is likely to sustain into 2025. The volatility in oil prices, which has been triggered by the ongoing trade war, could nudge GCC sovereigns to tap into the international debt markets to help them continue the capital expenditure required for the completion of some of their key infrastructure projects. Several steps have been taken by GCC governments in recent years that are pointed towards setting up a strong secondary debt market in the region, which are likely to bode well for investors and issuers alike. Additionally, the strong credit fundamentals of GCC sovereigns make them an attractive proposition among other emerging markets that carry inherent risks like currency volatility, and the lack of strong financial buffers. These factors are likely to keep the investor appetite for GCC debt issuances strong in the years to come.