Malaysia, Indonesia, Türkiye to be largest sovereign sukuk issuers in 2023-2024, says Moody's

Malaysia, Indonesia and Türkiye will be the largest sovereign issuers in 2023-2024, taking over from Saudi Arabia, which accounted for the largest single share of long-term sovereign sukuk issuances over the past six years, according to Moody’s Investors Service.

The rating agency expects the largest contribution to come from Malaysia and Indonesia, partly reflecting higher and sustained sukuk refinancing needs, although fiscal deficits have been modestly improving.

“Malaysia's fiscal deficit is likely to decline to around 5% of gross domestic product in 2023- 2024 from 6% in 2022, but will remain wide enough to support annual sovereign sukuk issuance of US$20 billion (RM90.45 billion)-US$22 billion in both years," it said in a report on 8th March.

According to Moody's, no major deviation in the fiscal policy is expected under the new government of Prime Minister Datuk Seri Anwar Ibrahim, who is likely to maintain wide fiscal deficits through 2024 to backstop economic recovery. 

"This will sustain relatively high levels of gross sukuk issuance, assuming that around half of the gross government financing will be met through sukuk issuances," it said.

Moody's said the PM announced several initiatives in his inaugural Budget 2023 tabled on 24th February to promote further growth in Islamic finance. 

"Among them will be to segregate shariah savings from conventional savings invested by the Employees Provident Fund (EPF), the national private sector pension fund, such that they generate stronger returns to shariah account holders,” it said.

The EPF, according to Moody's, is the largest individual holder of Malaysian government debt.

For 2023, Moody's expects long-term sovereign sukuk issuance to stabilise at around US$80 billion amid tight global liquidity and still-supportive, although lower, crude oil prices, before increasing to US$80 billion-US$85 billion in 2024.