Islamic sukuk issuances grew by 124.9 per cent year-on-year to $2.9 billion in 2024, outpacing the growth of conventional bonds

May 15, 2025

MUSCAT: Issuances of debt on the capital market of the Sultanate of Oman surged by 61.4 per cent to a total of $10.3 billion in 2024, underscoring the significant role of sukuk and conventional bond offerings by government and corporate entities in raising funds for growth and operational needs.

International ratings agency Fitch, in a commentary on Oman’s Debt Capital Market (DCM), noted that issuances across multiple currencies—including treasury bills—totaled $1.5 billion during the first quarter of 2025 alone.

Islamic sukuk issuances grew by 124.9 per cent year-on-year to $2.9 billion in 2024, outpacing the growth of conventional bonds, which rose by 45.5 per cent year-on-year to $7.4 billion (across all currencies). Notably, all debt issued by government-related enterprises (GREs) last year was in the form of sukuk, Fitch observed.

“Sukuk demand remains strong, primarily from Oman’s Islamic banks and windows—which held about 19.2 per cent of the banking system market share as of end-February 2025—as well as from Islamic banks in other GCC countries,” the ratings agency stated in its ‘Non-Rating Action Commentary’.

Looking ahead, Fitch anticipates a slowdown in the pace of debt capital market issuances by Omani entities during 2025–2026, in line with the Omani government’s objective to reduce its debt to around 30 per cent of GDP.

The combined size of the debt capital market declined by 2.1 per cent year-on-year to $45 billion as of end-Q1 2025, with US dollar-denominated instruments accounting for 68 per cent of the total.

“Oman is not immune to global macroeconomic and financial market uncertainty, and primary market dollar issuance has remained quiet since 2 April. However, we still expect some issuances in the pipeline, supported by continued liquidity from domestic, regional, and Islamic investors,” Fitch noted.

“We project government debt-to-GDP at 36.1 per cent by end-2026 (compared to 35.1 per cent in 2024 and 67.9 per cent in 2020). In 2024, the sovereign continued to deleverage and pre-paid portions of its debt ($2.8 billion; representing 2.5 per cent of GDP) using budget surpluses. Oman’s corporates—mainly GREs—are likely to continue issuing debt to diversify their funding sources. Omani banks remain primarily deposit-funded, while wholesale debt at Fitch-rated Omani banks is limited and mainly consists of interbank borrowings,” the agency added.

Oman’s debt capital market, currently one of the smallest in the GCC, is expected to deepen on the back of economic diversification efforts and government-led regulatory initiatives, Fitch said.

The authorities intend to progressively increase the share of domestic debt by strengthening the local debt market and refinancing a portion of upcoming external debt maturities in local currency. This strategy includes regular issuance of local instruments, revisions to the regulatory framework, and increased integration with international clearing systems to attract foreign investors. Additionally, the Central Bank of Oman (CBO) is developing new Islamic liquidity management tools—such as Sharia-compliant treasury bills—to further support the growth of this sector.