Sovereigns dominate sukuk market in 2017, trend expected to continue in 2018

Challenging oil prices and burgeoning budgetary deficits among the oil-producing economies supported a sharp increase in issuance of sovereign sukuk in 2017, a trend that is expected to continue in 2018. At the same time, emerging regulations will encourage new product growth such as green sukuk.

Ratings agency Moody's estimated in a report released on December 5 that total sukuk issuance for 2017 would be around $95 billion, compared to just over $85 billion in 2016. Of this, more than $50 billion worth of sukuk were issued by sovereigns, amounting to 70 per cent of the total in 2017, compared to about 45.5 per cent in 2016.

“Sovereigns have underpinned a recovery in the global sukuk market this year, with their issuance increasing by 50 per cent in the first eight months of 2017,” said Christian de Guzman, a Moody's vice president and senior credit officer and one of the report's authors. Despite two years of growth, total sukuk offerings in 2017 will remain well below their peak level of close to $150 billion in 2012.