Qatar’s debt capital market issuance is expected to be broadly stable amid the government’s continued debt repayments and limited corporate debt market access, according to Fitch Ratings.
Bank issuances are expected to continue as they replace upcoming maturities and strive to diversify their funding bases. Qatar’s debt market reached $130 billion outstanding at the end of H1 2024, the same as the end of H1 2023, with sukuk at 10%.
Since the start of 2024, the diversity of issuance has increased, with the issuance of the first sovereign green bond in the GCC, the first Qatari riyal corporate sukuk and a Formosa bond.
The Gulf state’s debt market is the third largest in the GCC after Saudi Arabia and the UAE. The sovereign holds the majority of the debt capital market.
Most Qatari banks have issued senior unsecured debt to extend their maturity profiles and diversify funding as corporate issuances have been small.
The majority of the debt market outstanding was denominated in US dollars at 65%, followed by riyals at 30%. Fitch said as much as 9.1% of the debt issuance has maturities in H2 2024, 13.4% in 2025, and 77.5% in 2026 and beyond.
Qatar markets regulators have taken steps to advance the still-developing debt capital market in recent years. However, limitations remain, such as the nascent riyal-debt market, the concentration of the investor base in banks and most corporates preferring bank financing over bonds or sukuk.
The Qatar Central Bank published its ESG and sustainability strategy for the financial sector in June 2024, aiming to boost sustainable finance and develop ESG sukuk and bonds.
The strategy includes outcomes such as the increased transparency of the financial sector’s role in national sustainability through a taxonomy of sustainable activities and guidelines for issuing sustainable products like loans, bonds and sukuk.
ESG debt in Qatar was $3.8 billion at the end of H1 2024, with sukuk at 19.5%. The inclusion of sukuk will attract investors seeking shariah-compliant ESG options. These initiatives are intended to enhance Qatar’s appeal to global investors focused on sustainability.
The Qatari government has been repaying external debt as it matures, and debt decreased by QAR27 billion in 2023. Fitch expects project debt/GDP to fall to about 48% of GDP in 2024 and 46% in 2025 from a peak of 85% in 2020.
