Posted on March 11, 2016

As debt issuances in the GCC are moving in an upward trajectory amid prolonged low oil price regime, Qatar’s gross debt, including sovereign and corporate, during 2015 stood at $19.09bn. Total government bonds issued during the year was $8.24bn and corporate debt amounted to $10.85bn, SICO Research noted yesterday.

In 2015, total debt issued in the GCC reached $171bn, of which $27.5bn was in government bonds, while $143.5bn was in long-term commercial loans taken by corporates, including government-related entities (GREs) The highest issuers of long-term commercial loans were Saudi Arabia and the UAE, accounting for 35 percent and 44 percent of total loans issued in 2015, respectively. Including government and corporate borrowing, total debt issued in the GCC from the beginning of the year to the end of February 2016 reached $15bn, while outstanding debt maturing in 2016 is $ 61.8bn. Total GCC sovereign debt issued in 2016 is expected to reach $45bn, up from $40bn in 2015 and $4bn in 2014 and is expected to cover 39 percent of GCC deficit financing needs in 2016, excluding Kuwait and the UAE.

Citing Bloomberg data, SICO Research noted that in 2015, total debt issued in the GCC reached $171bn, of which $ 27.5bn was in government bonds, while $143.5bn was in long-term commercial loans taken by corporates, including government-related entities (GREs). The highest issuers of long-term commercial loans were Saudi Arabia and the UAE, accounting for 35 percent and 44 percent of total loans issued in 2015, respectively.

In 2015, interest expense as a percentage of total revenues was the highest in Bahrain followed by Dubai, while Saudi Arabia’s interest expense was negligible. However, considering the recent downgrades by global rating agencies of GCC members, an increase in the cost of borrowing is imminent, thereby resulting in higher interest payments which should also increase with increasing leverage. Concurrently, lower revenues resulting from low oil prices will push the interest expense as a percentage of revenues even higher. With oil price is slowly picking up, yet continuing to be much lower than budgeted level, debt issuance in the GCC is expected to increase at elevated levels. While GCC governments have taken efforts in curtailing current expenditure and reducing the expense bills, increasing cost of borrowing and rising debt burden will negatively impact their expenses.

Reviewing the banking sector, the SICO research note said the largest three banking sectors in the GCC — Qatar, Saudi Arabia and the UAE — had a slow start to the year with assets growing by 0.2 percent on a MoM basis in the UAE, while both Saudi Arabia and Qatar witnessed marginal declines in asset growth in January. Lending growth, however, was stronger on a MoM basis in Qatar and Saudi Arabia during January, growing by 1.4 percent and 1.0 percent, respectively. Loans to deposit ratios in the three countries increased compared to January 2015 levels. Saudi Arabia’s LDR increased to 86 percent from 82 percent, Qatar’s LDR grew to 118 percent from 109 percent, and the UAE’s LDR increased to 95 percent from 92 percent.

source: The Peninsula

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