Saudi Arabia's debt capital market still has growth potential, investment minister says

Arab News

18-02-2025

RIYADH: Saudi Arabia's debt capital market has growth potential, as it accounts for less than 4 percent of gross domestic product, compared to the G20 average of over 40 percent, the investment minister revealed.
During a panel discussion titled 'Capital Crossroads: Connecting Global Investment Hubs' on the first day of the Capital Markets Forum 2025, held from Feb. 18-20 in Riyadh, Khalid Al-Falih explained that the Kingdom aims to expand its debt capital market significantly.
This falls in line with the fact that Saudi Arabia's debt capital market is expected to hit $500 billion by the end of 2025, fueled by the Kingdom's economic diversification efforts under Vision 2030, according to Fitch Ratings.
In February, Fitch's latest report highlighted several factors driving this growth, including the government's need for deficit funding, maturing obligations, and ongoing reforms.
'There is a call for action by our corporates, by our mid-markets to come forward and prepare for raising capital through bonds and sukuks and the debt capital market of Saudi Arabia. Many of them have been doing this in places like London and London has been accommodating and very open for Saudi entities,' Al-Falih said.
'We need to channel global capital into the opportunities not just in the Kingdom but in the region,' he added.
The minister said that King Abdullah Financial District Business Center has already attracted about 600 global companies and that many of them would require professional and financial services as well as raising capital for their regional growth.
'We don't want them to go and raise that capital internationally. We want them to do it here in Riyadh, aided and enabled by the great Saudi enterprises but also by partnerships from around the world,' Al-Falih said.
He further said that capital markets are a reflection of the broader economy and that the Kingdom maintains a balanced and diverse set of global relationships at the macro level. As one of the world's largest trading nations, Saudi Arabia has a varied trade balance, with India and China playing key roles in importing from and exporting to the country.
Al-Falih added: 'But we continue to trade in a very strong way on goods and services with the Western nations as well as other developing countries in the South. If you look at the investment of the G20 investors in the Kingdom of Saudi Arabia, six of the top 10 are from the East, and the other four are Western countries.'
He also highlighted the strong interest from Asian investors in capital flow into Saudi Arabia.
'The Kingdom in many ways is a connector, as I mentioned, of owners of capital from investors from East and West, and hopefully, we play a significant role in terms of bringing investors, bringing companies together, creating a platform for global cooperation and collaboration which is very much central to how we want to lead going forward to minimize the fragmentation and tension that seems to have emerged the last few years,' the minister said.
During the panel discussion, Al-Falih also tackled how Vision 2030 created a massive shift in the basic economy, with significant growth in non-oil sectors being recorded.
He added that over the past seven to eight years, there have been typical fluctuations in the oil markets, including price changes and variations in Saudi production, which directly impact government revenues and the balance of payments. However, the other sectors, particularly the non-oil economy, have experienced steady and consistent growth of 4 to 6 percent throughout this period.
The minister added: 'Sectors that hardly existed are growing at double-digit year on year for the period since Vision 2030, despite COVID and despite micro volatility globally, as I mentioned. You look at tourism, you look at tech, you look at logistics and transportation, all of these are sectors that are drawing a lot of investments and that is reflected in the capital markets, which is the subject of our gathering today.'
The minister also said that over the last two to three years, between 40 and 50 initial public offerings for equity listings have taken place.
'There is still a significant need for this forum and for the capital markets governed by CMA (Capital Market Authority), but really the motor for it and the driver is Tadawul because that is the platform of which everybody works to continue to reflect what is happening in the basic economy, which is diversification and rebalancing of our capital markets,' he said.
Baroness Gustafsson of Chesterton of the Order of the British Empire and the UK's Minister for Investment, who was also on the same panel, said that bold strategies are needed to drive investment success.
'You have to be quite clear about what it is that you want to accomplish and make that available to investors, and we have done that with our modern industrial strategy, laying out those sort of key sectors that we think are going to be really contributing to the growth of the UK so the investors can align alongside that to make sure they are supporting that,' Gustafsson said.
'The other aspect that you need is that capability. So, that exists in both terms of the sort of innovation capability. So, we have got some of the best academic institutions in the world with world-class expertise that are going out solving these really complicated world problems,' she added.
Organized by the Saudi Tadawul Group and held under the patronage of the Minister of Finance and Chairman of the Financial Sector Development Program Committee, Mohammed Al-Jadaan, the forum will convene top policymakers, business leaders, and industry experts to discuss key trends and developments shaping the nation's capital markets.
With a strong focus on the evolving financial landscape, the event is held under the theme 'Powering Connections,' and is set to unlock investment opportunities, foster strategic partnerships, and further position the Kingdom as a key player in the global capital markets ecosystem.