ElKuwaiz: Saudi debt market doubled to SAR 800B

Mohammed ElKuwaiz, Chairman of the Capital Market Authority (CMA)

The size of Saudi debt market has doubled to currently stand at SAR 800 billion, from SAR 400 billion in 2019, Chairman of the Capital Market Authority (CMA) Mohammed ElKuwaiz said.

In a dialogue session moderated by Argaam at the Debt Markets and Derivatives Forum (DMDF) 2024, the chairman expected the Saudi debt market to see another two-fold increase over the next five years, in a bid to meet the Kingdom’s funding requirements.

Although the Saudi debt market is still in its early stages, fundraising through it exceeded that through the stock market in size in 2021, he added.

The launch of the Saudi Vision 2030 and the acceleration of projects and their requirements, according to ElKuwaiz, have altered and lifted demand for borrowing, outpacing that for deposits. Therefore, it was about time to develop the local debt market.

The banking system was formerly characterized by increased liquidity, hence positioning the Saudi economy as a source of funds. This was because liquidity and funds outstripped the available investment opportunities. In addition, the debt market was deemed unavailing since the banking system was able to cover the Kingdom’s funding needs, he explained.

Financing was later phased out from the banking system onto equities. “Accordingly, great strides were witnessed in the local stock market, underpinning its key role in terms of financing during the past years,” ElKuwaiz indicated.

However, he noted that the Saudi debt market still represents less than 20% of the local economy by size, specifically about 18%. In general, the debt market of countries in the same region should account for more than 30% of the economy.

Although the Saudi debt market has become more open to foreign investors when compared to the stock market, the ratio of foreigners tapping local debt is not significant. The goal is to join international debt indices to position Saudi Arabia on the global debt map, the CMA chairman pointed out.

Meanwhile, ElKuwaiz revealed that work is underway to revisit several industry-related requirements to eliminate obstacles facing investment funds and facilitate their investment in local debt instruments.