Sukuk Issuance Expected to Drop in 2025

Sukuk issuance is projected to decline in 2025 following a record-setting year in 2024, driven primarily by reduced refinancing needs from key sovereigns in the Gulf Cooperation Council , particularly Saudi Arabia. According to Moody’s Ratings, the total global issuance is expected to fall to approximately $210 to $220 billion, a significant decrease from the previous year.

The sharp decline in issuance is primarily attributed to the easing refinancing requirements for sovereigns in the GCC, a region that has historically been a major contributor to global sukuk markets. Saudi Arabia, which had a robust presence in sukuk issuances in recent years, is expected to significantly scale back its debt issuance activities in the coming year. This shift is due to the country’s reduced fiscal pressure following high oil revenues, which have alleviated the immediate need for debt refinancing.

As the largest economy in the Middle East, Saudi Arabia has traditionally been one of the largest issuers of sukuk, particularly as it sought to diversify its economy and fund various mega projects under its Vision 2030 plan. However, with less immediate pressure to raise funds, the kingdom is likely to adopt a more cautious approach to sukuk issuance in the near future.

While GCC countries, particularly Saudi Arabia, are expected to reduce their participation in the sukuk market, other countries are set to see growth in issuance. Indonesia and Turkey, two significant players in the sukuk market, are expected to increase their sovereign sukuk issuances in 2025, helping to partially offset the slowdown in the GCC region.

Indonesia, with its large Muslim population, continues to be a strong proponent of Islamic finance, including sukuk. The country has already shown a strong commitment to Islamic debt markets and is expected to issue more sukuk as part of its efforts to support infrastructure development and meet growing financial needs. This trend aligns with Indonesia’s broader strategy to deepen its involvement in global Islamic finance markets and tap into the growing demand for Sharia-compliant investments.

Similarly, Turkey’s issuance is poised to increase in 2025, as the country seeks to maintain its presence in the global sukuk market. Turkey has been a notable issuer of sukuk in recent years, using the funds for infrastructure and fiscal purposes. With a diversified economy and a large Muslim population, Turkey remains an attractive destination for sukuk investors. As the country navigates its economic challenges, including inflationary pressures and fiscal adjustments, it is likely to rely more heavily on sukuk issuance to manage its financing needs.

Despite the anticipated decline in total global sukuk issuance, the overall outlook for Islamic finance remains positive. The sukuk market has seen consistent growth over the past decade, and despite the contraction in certain regions, there are still ample opportunities for issuers to tap into global demand for Sharia-compliant investments. As countries like Indonesia and Turkey increase their issuance, the shift in market dynamics could open new avenues for growth in other emerging markets as well.

The sukuk market, which offers a unique opportunity for Islamic investors to participate in capital markets in a way that adheres to Islamic principles, has become a critical component of global financial markets. As such, the market’s evolution is closely tied to broader economic trends, particularly in the GCC region where sovereigns have traditionally played a dominant role.

The shift in the market reflects broader trends in global finance. While the GCC remains a major player, particularly in the issuance of conventional bonds and sukuk, diversification efforts in countries like Indonesia and Turkey are expanding the scope and reach of sukuk. These developments may have long-term implications for how the sukuk market evolves, with non-GCC nations playing an increasingly significant role in shaping the future of Islamic finance.