The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
DUBAI / Emirates Business
The sovereign long-term commercial borrowing in the Middle East and North African (Mena) could increase by 25% this year after falling 38% in 2018, according to S&P Global Ratings.
This is chiefly because higher oil prices and fiscal consolidation measures in Gulf Cooperation Council (GCC) countries significantly reduced GCC sovereigns’ funding needs in 2018. However, lower oil prices in 2019 will not support further reduction in GCC fiscal deficits.
S&P expects Saudi Arabia, Egypt, and Lebanon will issue the lion’s share of long-term commercial government debt in the region in 2019 (22%, 20%, and 14% respectively). It sees Iraq continuing to have the largest share of bi- and multilateral debt in 2018 (40% of the total).
At the same time, S&P expects Kuwait, Egypt, and Iraq to significantly increase their gross commercial long-term borrowing in 2019 compared with 2018. About 44% of Mena sovereigns’ $136 billion of gross borrowing this year will go towards refinancing maturing long-term debt, resulting in an estimated net borrowing requirement of $76 billion.
Adding amounts owed to bi- and multilateral institutions, total debt will reach about $892 billion, a year-on-year increase of $85 billion, or 11%. S&P expects that outstanding short-term commercial debt (original tenor of less than one year) will rise to $169 billion by end of year.
For 2019, S&P projects that sovereigns’ commercial debt rated in the ‘AA’ category will be 18% of the total, significantly up from 8% in 2018. This is based on its expectation that the Kuwaiti government will pass a new debt law, raising the debt ceiling and authorising extra borrowing.