GCC Debt Capital Markets To Hit $1tn

Oil revenues are among the main drivers of GCC DCM activity. Sovereign issuances are likely to rise as oil prices fall (2025: $70/barrel; 2026: $65), given modestly rising demand, and ample global supply.

While not the key funding source, GCC banks and corporates are also likely to diversify through DCMs.

GCC debt capital markets

Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings, said: “After 11 per cent year-on-year growth, the DCM reached a milestone of about $1tn outstanding at end-11M24, with 40 per cent as sukuk.

“It is poised for growth in 2025 on the need to finance government projects, maturing debt, fiscal deficits, diversification goals, and regulatory reforms.

“We rate around 70 per cent of GCC US dollar sukuk, 81 per cent of which is investment-grade, and with no defaults.”

Fitch expects the Fed to cut rates by 125bp to 3.5 per cent by 4Q25 (end-2026: 3.5 per cent), and most Gulf Cooperation Council central banks are likely to follow suit. This should make the funding environment more favourable.

The evolution of the Middle East conflict is uncertain and escalation could limit DCM growth.

However, four out of six sovereigns in the region are investment-grade; all on Stable Outlooks.

Sharia complexities, including from linked to AAOIFI Standard 62, could be a risk for sukuk. ESG debt reached $48bn outstanding, with 42 per cent sukuk.

DCM development is fragmented across the Gulf Cooperation Council. Saudi Arabia and the UAE have the most developed DCMs, followed by Qatar, Bahrain, and Oman, with Kuwait being the least mature.

The new government in Kuwait is aiming to update the liquidity law to permit borrowing in capital markets, but the timeline is uncertain.

The recent GCC fund passporting regulations could open new DCM investment options across the region.