Fitch Ratings reports that GCC countries, Malaysia, Indonesia, and Turkiye are becoming significant emerging-market (EM) debt issuers. In the initial five months of 2024, these nations represented 51% of all US dollar debt issued by EMs, excluding China (2023: 43.7%; 2020: 32.8%). The agency anticipates this trend to persist through 2024-2025, influenced by government strategies to enhance debt capital markets (DCM), diversify funding sources, finance fiscal deficits, and manage maturing debts. Sukuk, as a crucial funding and policy instrument, constituted 12.4% of all EM dollar debt issued in 2024 (excluding China; 2023: 15%; 2017: 5%).

During the first quarter of 2024, the GCC DCM expanded by 7% to $940 billion. Saudi Arabia leads with a 43% share in the GCC's debt capital market, followed by the UAE at 30%. Approximately 40% of the GCC DCM was in sukuk, with the remainder in conventional bonds. Over a third of GCC debt issued in the previous year was sukuk. The GCC, Malaysia, Turkiye, and Indonesia's inclusion in global bond indices boosts international investor demand for dollar bonds. Fitch has upgraded the ratings of several countries in the region over the past 15 months.

Sukuk dominates domestic DCM issuance in Malaysia (60% in 2023), Saudi Arabia (56%), and Indonesia (55.3%), and is significant in other nations. Most Fitch-rated sukuk have an economic impact akin to bonds and are senior unsecured obligations. In 2023, sukuk and comparable bonds were priced similarly. Saudi Arabia aims to expand sukuk and debt markets, driven by budget deficits, while the UAE seeks funding diversification despite expected surpluses. Indonesia's DCM issuance is expected to decelerate due to fiscal restraint.

Malaysia's 2024 budget, slightly expansionary, will stimulate DCM growth, guided by the Ekonomi MADANI framework. In Turkiye, recent foreign-currency debt issuances indicate reduced near-term refinancing risks due to improved investor sentiment following policy shifts. Outstanding EM dollar debt (excluding China) reached $2.3 trillion by May 2024, with Mexico leading (11.4%), followed by Argentina, the UAE, Saudi Arabia, and others. Sukuk accounted for 5.2% of all EM debt issued in 2024.