Abu Dhabi, Saudi Arabia expected to issue bonds by end-2021

DUBAI: Abu Dhabi and Saudi Arabia, and possibly other Gulf sovereigns, are expected to return to the international debt markets before the end of this year to lock in more funds while interest rates remain low, banking sources said.

The oil-rich Gulf was battered by last year's crash in oil prices and the impact of the COVID-19 pandemic, which simultaneously slowed plans to diversify away from hydrocarbons and dented revenues.

With Brent crude now trading at over $72 a barrel, Gulf governments' funding needs have diminished but several are expected to try to lock in cheap funding soon amid expectations of tighter policies from the US Federal Reserve.

Abu Dhabi could issue bonds in a relatively small deal by the end of 2021, three sources said, with one of them adding the emirate will likely issue around $3 billion.

Abu Dhabi has so far this year issued $2 billion against $15 billion in 2020.

Saudi Arabia, after raising $5 billion and 1.5 billion euros via bonds earlier this year, is expected to tap the market again before year-end, three sources said. It issued $12 billion last year.

The kingdom was expected to issue US dollar-denominated sukuk, or Islamic bonds, but two sources said its sukuk programme was not compliant with sharia standards adopted by authorities in the UAE, which could dent demand.

Qatar will most likely post a budget surplus this year and said in April it would not need to raise new debt to cover its budget. But in June, the acting finance minister said Qatar could tap the debt market only on an "opportunistic" basis.

Oman and Bahrain, the Gulf's weakest economies, are engaged with banks about their financing options, sources said, and both have shortfalls in their current budgets.

Bahrain will most likely issue bonds again later this year, two sources said. Oman should have completed its financing for 2021 with its last bond sale that raised $1.75 billion in June, one of them added.

A spokesman for the Saudi finance ministry referred Reuters to the government's 2021 borrowing plan, which showed Saudi Arabia still has over $6 billion to raise via international debt this year.

The other Gulf governments did not respond to requests for comment on their funding plans.