Debt issuances can help overcome deficits in GCC budgets

Qatar Financial Markets Authority (QFMA) and International Capital Market Association (ICMA) hosted the QFMA and ICMA Conference: Developing a Corporate Debt Market, attended by regulatory authorities and leading commercial and investment bankers.

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Bonds

Speaking at the event, Doha Bank Group CEO Dr R Seetharaman said: “The GCC witnessed bond issuances exceeding USD 65 billion this year. GCC conventional bond issues exceeded USD 55 bn this year. The major conventional bond issuances came from Saudi Sovereign – USD 17.5 bn, Qatar Sovereign – USD 9 bn, Emirate of Abu Dhabi – USD 5 bn and QNB – USD 5.16 bn.”

He added: “The GCC sukuk bond issues exceeded USD 10 bn this year. The major sukuk issuances came from DP World – USD 1.2 bn, Investment Corporation of Dubai – USD 1 bn and Kingdom of Bahrain – USD 1bn. GCC governments had issued major bonds this year to manage fiscal deficits. GCC sovereign bond issues this year exceeded USD 35 bn, the recent being the Saudi bond issue of USD 17.5 bn.”

Qatar debt market

debt-market

He highlighted the benefits of a well-developed local debt market in Qatar. He said: “A local debt market can facilitate the sterilization of large capital inflows. It provides tools for the government to finance large fiscal deficits. It promotes market discipline and transparency through improving the quality and disclosure of information.”

It enhances financial stability by having a more diverse financial system. The continued investment in infrastructure and other developmental projects increases the need for new sources of funding with long-term maturities, he said.

Oil prices

Low oil prices

Low oil prices may affect diversification and infrastructure development funding and hence debt is the ideal solution for Qatar’s infrastructure development needs, according to Seetharaman.

Qatar has one of the widest ranges of maturities compared to other GCC international issuances. Given this edge, Qatari companies can benchmark the yield curve through debt issuances and benefit from lower interest rates, said Seetharaman.

He called for appropriate reforms to existing bankruptcy laws in Qatar to ensure adequate investor protection. Further, Qatar may improve the efficiency of settling disputes by aligning arbitration regulation to international standards.

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