UAE- GCC set to tap global loan market to finance deficits

3/8/2016 11:48:21 PM

(MENAFN- Khaleej Times)

Dubai: GCC sovereigns are looking to issue syndicated loans financed by international banks to finance their emerging fiscal deficits in 2016.

Qatar is seeking $10 billion while Oman is looking to tap $1 billion. According to Markaz Qatar is turning to international debt markets to shore up its finances that are pressured by low energy prices. The country is in talks with banks about a sovereign sukuk issue and is looking to cover its $12.8 billion deficit by using a combination of international loans and bond sales.

Bahrain launched a $600 million two-part bond sale offering a higher yield than it did for the previously cancelled $750 million debt sale after the kingdom's credit rating was downgraded to junk status by Standard & Poor's. S&P also downgraded Saudi Arabia Bahrain and Oman in its second mass cut of large oil producers in almost exactly a year citing the pressures being created by the drop in oil prices. Saudi Arabia was downgraded two notches to A- negative from A+ stable.

According to estimates this year sovereigns in the Gulf may raise $20 billion in bonds almost 10 times as much as the $2.5 billion they raised in 2015.GCC sovereign financial and corporate borrowers must repay or refinance $94 billion in bonds and loans in 2016 and 2017 as low oil prices continue to hit revenues according to HSBC. The Gulf countries account for a total $610 billion in bonds and loans.

"Tightening regional liquidity rising rates and recent credit rating downgrades of some countries could also impact refinancing" the bank has said.

HSBC estimated that regional energy exporters would have fiscal and current account shortfalls of $260 billion and $135 billion this year and next year equal to 8.7 per cent 4.5 per cent of regional GDP.

On the market performance Markaz pointed out in its report that with nearly all stock indices ended in green February was a good month for markets across Middle East and North Africa as Dubai and Abu Dhabi lead the charge. Dubai's benchmark index rose 8.1 per cent and Abu Dhabi index recorded 7.3 per cent surge while Bahrain (-0.7 per cent) and Jordan (-1.5 per cent) lagged behind.

Momentum trading led to investors chasing small and mid-cap stocks in the UAE stock exchanges as investor confidence soared over speculation that the oil price had bottomed out. Steps such as finding consensus for production cuts are being taken to stabilise oil price which lifted investor sentiments and the fact that most of the stocks were available at a discount after the January fall directed investors in droves to the markets. Real estate and construction-related sectors performed well led by Arabtec which rose 20 per cent in February Kuwait Financial Centresaid.

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