Saudi Arabia is continuing to enhance the management of its public debt by restructuring the maturities of government sukuk, a move that experts say will strengthen fiscal sustainability and improve the efficiency of the government's debt portfolio.
Mohammed Al-Farraj, senior head of asset management at Arbah Capital, told Asharq Al-Awsat that the early repurchase and issuance of new, longer-dated sukuk represented the application of global best practices in sovereign debt management, aimed at reducing refinancing risk and building a more balanced debt structure.
The National Debt Management Center said it had completed the early repurchase of part of the Finance Ministry’s outstanding sukuk maturing between 2026 and 2030, with a total value of about 17.1 billion riyals ($4.6 billion).
The repurchase was carried out alongside a new sukuk issuance worth about 17.2 billion riyals ($4.6 billion).
The center said the initiative formed part of its efforts to deepen the domestic debt market and strengthen the management of government debt obligations and future maturities, supporting the kingdom’s public finances over the medium and long term.
The new sukuk were issued across five tranches.
The first tranche, worth about 1.45 billion riyals ($387 million), matures in 2031, while the second, valued at 1.62 billion riyals ($432 million), matures in 2033.
The third and largest tranche was worth about 10.55 billion riyals ($2.8 billion) and matures in 2036. The fourth, valued at 1.74 billion riyals ($464 million), matures in 2039, while the fifth, worth 1.80 billion riyals ($480 million), matures in 2041.
Al-Farraj said the early repurchase would reduce refinancing risk by easing the concentration of obligations in particular years and redistributing them over a longer time horizon.
That would give the Finance Ministry greater flexibility in managing cash flows and funding needs, while limiting the risk of having to refinance large amounts at a single point in time, particularly if borrowing costs rise in the future, he said.
Replacing shorter-dated sukuk with securities extending to 2041 would also increase the average maturity of government debt and signal a more proactive approach to managing liabilities, Al-Farraj said.
He added that the move would reinforce confidence among investors and credit rating agencies in the kingdom’s ability to manage its debt efficiently.
The transaction also carries broader implications for the domestic debt market.
Al-Farraj said the longer-dated issuances would help complete the government sukuk yield curve, providing an important pricing benchmark for debt issued by companies and other government entities and improving the efficiency of Saudi Arabia’s debt instruments market.
Sukuk with maturities of more than 15 years would also provide instruments better suited to institutional investors such as pension funds and insurance companies, which seek long-term assets that match their future liabilities, he said.
That, in turn, would support market depth and liquidity.
Al-Farraj said the transaction was part of Saudi Arabia’s efforts to consolidate the domestic sukuk market’s position as one of the largest debt markets in the region.
It also supports the objectives of the Financial Sector Development Program and Saudi Vision 2030 by contributing to a deeper and more efficient debt market.
Al-Farraj described the exercise as a “re-engineering” of the government debt portfolio, combining a smoother maturity profile, lower refinancing risk and stronger fiscal sustainability with the continued development of the domestic sukuk market for the benefit of the government, private sector and investors over the long term.
