Global Sukuk Issuance to Reach $200 Billion in 2025

Following its strong performance last year, global sukuk issuance is expected to between $190 billion and $200 billion in 2025 with foreign currency-denominated issuance contributing $70 billion to $80 billion, New York headquartered S&P Global said in a report.

The total issuance reached $193.4 billion in 2024, down slightly from the previous year’s $197.8 billion.

However, a notable difference was the 29% rise in foreign-currency issuance to $72.7 billion as of 31 December 2024. The main contributors to this increase were issuers from Malaysia, the GCC countries led by Saudi Arabia, and Indonesia. S&P Global expect foreign currency-denominated issuance to remain elevated in 2025.

Many issuers wanted to benefit from the improving global liquidity conditions in 2024, with major central banks starting to ease their monetary policy and avoid any potential disruption that could come from local or geopolitical developments.

“In 2025, we expect monetary easing to continue, albeit at a slower pace than previously expected. This, combined with high financing needs in core Islamic finance countries due to ongoing economic diversification programs, will lead issuers to take any windows of opportunity to issue in the market, we believe,” S&P Global said

The report is also of the view that the potential impact from the adoption of Standard 62 of the Accounting and Auditing Organisation for the Islamic Financial Institutions (AAOIFI) will come in 2026 at the earliest, as the organisation is continuing to receive feedback from the market.

Evolving Sharia requirements have already led to a weakening of legal documents in some of the structures, specifically for sukuk in which equity holdings are used as underlying assets, the report said.

“In our view, some of these sukuk may contain additional risks compared with traditional sukuk and conventional financial obligations, which could lead to potential uncertainty about their resolution. At some stage, the industry will have to rethink the best way to reconcile Sharia requirements with the market appetite for fixed-income instruments. Collaboration between the industry stakeholders could help to achieve this objective,” it pointed out.

Global sukuk issuance stabilised in 2024, reaching $193.4 billion at year-end compared with $197.8 billion a year earlier. This performance was underpinned by a significant increase in foreign currency-denominated issuance and a drop in local-currency issuance.

It was further aided by strong financing needs in core Islamic finance countries, the need to attract foreign capital, and improving global liquidity conditions, with major central banks starting to ease their monetary policy, the report said.

Drop in Local Currency Sukuk

Local currency-denominated sukuk issuance fell by 14.6% year on year, primarily due to lower issuance in Malaysia, Pakistan, Turkiye, and Indonesia.

The largest drop in local-currency issuance was in Malaysia, where government issuance decreased because of a smaller fiscal deficit due to the reduction of subsidies. Similarly, Malaysia’s central bank’s issuance fell as a result of tighter liquidity conditions for the Islamic banks as their financing growth continued to outpace deposit growth.

Pakistan also saw lower local-currency issuance, as the government’s fiscal position remains under pressure and monetary conditions remain tight, as did Turkiye, where tight monetary conditions resulted in lower local currency-denominated issuance.

However, local-currency issuance in Saudi Arabia resumed its growing trend as the government tapped the market with jumbo issuance and started issuing retail sukuk, the report said.