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Saudi Arabia's CMA Licenses 1st Entity for Special Purposes

Saudi Capital Market Authority (CMA) logo
Saudi Capital Market Authority (CMA) logo
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Saudi Arabia's CMA Licenses 1st Entity for Special Purposes

Saudi Capital Market Authority (CMA) logo
Saudi Capital Market Authority (CMA) logo

Saudi Capital Market Authority (CMA) has licensed “Itqan Finance” as the first private-purpose entity to provide asset-backed debt instruments in accordance with the rules governing special purpose entities issued by the Authority.

This license is the first in Saudi Arabia to establish a facility of special purposes where the entity is legally independent and has the financial disclosure, and it is terminated when reaching the goal for which it was established.

One of the most important objectives of establishing a special purpose entity is to obtain financing through an alternative for bank loans and financial institutions. This is done by issuing debt instruments through a special purpose entity and transferring assets to the facility to convert asset-related risks or restricting commitments relating to debts' instruments.

It also aims to protect the rights of investors, holders of debt instruments, from the bankruptcy of entities associated with the enterprise as the sponsors or owners.

The move is complementary to the role of CMA in organizing and developing the financial market, in an effort to develop the sukuk market, debt instruments and diversify sources of finance for public and private sector projects, which are part of the Authority's strategy to facilitate financing in line with Saudi Financial Sector Development Program.

It is noteworthy that on 27 December 2017, the Authority issued the rules to regulate the establishment, licensing, registration, offering and management of special purposes entities and associated activities in the Kingdom.

On April 1, 2018, the rules regulating special purpose enterprises entered into force.

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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
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IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki

The International Monetary Fund said on Thursday that an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy, but commodity prices remain below the highs of the past year.

IMF spokesperson Julie Kozack told a regular news briefing that the Fund is closely monitoring the situation in southern Lebanon with "grave concern" and offered condolences for the loss of life.

"The potential for further escalation of the conflict heightens risks and uncertainty and could have significant economic ramifications for the region and beyond," Kozack said.

According to Reuters, she said it was too early to predict specific impacts on the global economy, but noted that economies in the region have already suffered greatly, especially in Gaza, where the civilian population "faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid deliveries.

The IMF estimates that Gaza's GDP declined 86% in the first half of 2024, Kozack said, while the West Bank's first-half GDP likely declined 25%, with prospects of a further deterioration.

Israel's GDP contracted by about 20% in the fourth quarter of 2023 after the conflict began, and the country has seen only a partial recovery in the first half of 2024, she added.
The IMF will update its economic projections for all countries and the global economy later in October when the global lender and World Bank hold their fall meetings in Washington.
"In Lebanon, the recent intensification of the conflict is exacerbating the country's already fragile macroeconomic and social situation," Kozack said, referring to Israel's airstrikes on Hezbollah in Lebanon.
"The conflict has inflicted a heavy human toll on the country, and it has damaged physical infrastructure."
The main channels for the conflict to impact the global economy have been through higher commodity prices, including oil and grains, as well as increased shipping costs, as vessels avoid potential missile attacks by Yemen's Houthis on vessels in the Red Sea, Kozack said. But commodity prices are currently lower than their peaks in the past year.
"I just emphasize once again that we're closely monitoring the situation, and this is a situation of great concern and very high uncertainty," she added.
Lebanon in 2022 reached a staff-level agreement with the IMF on a potential loan program, but there has been insufficient progress on required reforms, Kozack said.
"We are prepared to engage with Lebanon on a possible financing program when the situation is appropriate to do so, but it would necessitate that the actions can be taken and decisive policy measures can be taken," Kozack added. "We are currently supporting Lebanon through capacity development assistance and other areas where possible."