(MENAFN-Khaleej Times) S&P expects that the smaller GCC states of Oman and Bahrain, along with emirates of Ras Al Khaimah and Sharjah, will issue commercial debt in the market
Sovereign debts of 12 countries in the Middle East and North African, or Mena, region is expected to surge by $12 billion or 27 per cent to $56 billion compared with the borrowing in 2013, Standard & Poor’s Ratings Services said on Monday.
The ratings agency predicted that while sovereign capital market activity in the Gulf Cooperation Council is likely to remain muted, Egypt, Morocco, and Lebanon would be the biggest debt issuers this year. S&P’s observation is based on its projections about the long-term borrowing of 12 sovereigns that it rates in the region from commercial sources in 2014.
S&P analysts estimated that with absolute debt levels continuing to increase, by year-end 2014, the total outstanding sovereign commercial debt in the Mena region would have risen by $17 billion to $462 billion in nominal terms since last year. In 2014, Asian nations will increase commercial borrowing to $2.5 trillion, a 4.9 per cent increase from the previous year, it said. Net borrowing will make up $1 trillion of that amount, boosting the total stock of debt by 6.9 per cent to $15.4 trillion by year-end, S&P said of the 21 countries it covers in the Asia-Pacific region
In the Mena region, about 67 per cent, or $38 billion of the sovereigns’ gross commercial borrowing will be to refinance maturing long-term commercial debt, compared with $25 billion in 2013, resulting in an estimated net commercial borrowing of $18 billion, analysts at S&P said.
“Consequently, we project that rated Mena sovereigns’ commercial debt stock will reach an equivalent of $462 billion by the end of 2014, up by $17 billion, or four per cent from 2013. Adding in bilateral and multilateral debt, the total stock will reach $504 billion, a year-on-year increase of $15 billion, or three per cent. We expect that outstanding short-term commercial debt will reach $145 billion at year-end 2014,” S&P said.
According to S&P, Jordan will face the highest debt rollover ratio (including short-term debt) among rated Mena sovereigns, reaching 49 per cent of total debt, followed by Egypt (42 per cent).
“In general, sovereign debt capital markets are relatively underdeveloped in the GCC and we do not expect Abu Dhabi, Kuwait, Qatar, or Saudi Arabia to issue long-term debt in 2014. In our view, financing these states’ large investment programs could result in weaker government balances, but as long as oil prices remain high, we expect them to continue to post fiscal surpluses. We expect the majority of borrowing related to these investment programs to take place at the government-related entity level,” the ratings agency said.
However, S&P expects that the smaller GCC states of Oman and Bahrain, along with emirates of Ras Al Khaimah and Sharjah, will issue commercial debt in the market. Ras Al Khaimah issued a $500 million bond under its $2 billion sukuk issuance program (RAK Capital) in 2013. “We expect that it will issue again in 2014 in order to refinance about $0.4 billion in debt coming due rather than running down its cash balances. We also expect Sharjah will issue around $0.5 billion this year as it continues to invest in capital projects,” S&P report said.
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