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Global Islamic bond issue a success

Via DW : Saudi Arabia’s first Islamic bond issue has raised billions of dollars. It provided the country with some hope that pressure on foreign reserves might ease in the process, enabling faster economic restructuring.

Saudi Arabia raised $9 billion (8.4 billion euros) in its first global Islamic bond issue.

The debut international sukuk was seen trading at a cash price premium of roughly 0.5 cents over the bond issue price in the grey market on Thursday, illustrating demand that had generated orders of $33 billion, traders told Reuters.

Islamic financial instruments including sukuks are structured to comply with Islamic law, which does not allow the payment of interest.

The sale of the Islamic bond came after the kingdom turned to the conventional global debt market in October for the first time, raising $17.5 billion in a standard bond issue.

Plugging holes

Saudi Arabia has also sold domestic bonds and drawn on its accumulated reserves in an effort to reform the economy and address budget deficits caused by the collapse in oil revenues since 2014.

The dollar sukuk was the largest-ever Islamic bond and the largest emerging markets debt sale this year, beating Kuwait’s $8-billion conventional bond in March.

In a report earlier this month, Saudi firm Jadwa Investment said the kingdom’s foreign reserves, including securities, bank deposits and gold, had fallen to a near six-year low.

Reserves dropped to $514 billion in February, with more recent data not yet available.

“Any new international sovereign bond, or indeed sukuk issuance, should alleviate the pressure on foreign exchange reserve withdrawals, Jadwa researchers said in a statement.

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