Foreign currency-denominated sukuk issuances could reach $70-$80 billion in 2025, aided by the US Fed’s expected interest rate cuts, according to S&P Global.
Foreign currency issuances increased by 9% in the first half of 2025 to $41.4 billion from $38 billion in 2024, underpinned by strong activity in the UAE, Bahrain, and Kuwait, the ratings agency said.
The growth came despite volatility in international capital markets following the proposed reciprocal tariffs by the US government and slower-than-initially-expected monetary easing.
Significant financing needs in core Islamic finance countries supported sukuk issuances due to lower oil prices and fiscal deficits, S&P added.
Although Saudi Arabia reported a slight decline in issuances, the issuers contributed 38.9% of the market volume in the first half of the year. Many issuances came from banks as they continued to fund Vision 2030 initiatives.
A similar trend emerged in the UAE, where financial institutions and corporates capitalised on conducive economic conditions to raise funds.
In contrast, lower local currency issuances in core Islamic finance countries caused global sukuk issuance to fall by about 15% in the first half of 2025 to $101.3 billion from $119 billion a year ago.
S&P expects local currency issuance to remain subdued, mirroring the liquidity conditions in some core markets and lower financing needs due to good fiscal performance in other markets.
The outlook for foreign currency-denominated sukuk issuances in the second half of 2025 will depend on the evolving geopolitical situation in the Middle East, according to S&P.
“Since we don’t expect a full-scale regional war, we think the resilient foreign currency issuance trends observed in the first half will continue,” the ratings agency said.
Sukuk will remain a key financing tool for core Islamic countries that rely heavily on oil revenue, S&P said.
“We assume oil prices will average $60 for the remainder of 2025 and $65 for 2026 and that the market’s oversupply will continue to outweigh demand from 2025.”
(Editing by Bindu Rai)
