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Financing costs in GCC countries drops to pre-pandemic levels

Financing costs in GCC

Doha, (Business News Report)|| Financing costs in the GCC countries, in the dollar bank loan sector, has fallen to pre-pandemic levels.

According to loan sector workers, the low cost of financing contributes to reducing the financing costs in GCC companies and sovereign funds this year.

The dollar lending market situation summarizes the economic situation in the Gulf countries, as it carries excess liquidity at banks and a small number of transactions.

After the pooled dollar loan market suffered a shock during the pandemic in 2020, the Gulf loan market regained its activity due to the return of economic growth, the rise in oil prices, and the progress of vaccination efforts to confront COVID-19.

The total consolidated loans in the Gulf countries from the beginning of 2021 until the end of August of the same year amounted to $80.3 billion. This is compared to about $52.7 billion for the same period in 2020, which means an increase of 52.3 percent.

The number of deals for syndicated loans that were closed since the beginning of 2021 until the end of August of the same year reached 47 deals. This is compared to about 52 deals for the same period in 2020, which means a decrease of 9.6 percent.

During 2020, loans witnessed an increase in the cost of financing, while 2021 witnessed a correction of the credit margins on the financing lines in the dollar currency.

Financial data for Dealogic indicated that the dollar loan market in the Middle East accounted for 87 percent of the bank lending market for emerging market companies during the past five years.

It was noted that some Saudi companies have tended to finance their long-term commitments with “medium to long-term” bank loans, and this is a positive step that contributes to harmonizing the commitments and financing activities.

The past year witnessed, most of the Gulf borrowers focus on refinancing their loans and negotiating in order to obtain better financing terms and extend the bank facilities for longer periods.

The riyal-denominated bank lending market has expanded its products to include providing green loans to Saudi companies, for the first time during 2021.

During the third quarter of 2020, Saudi Arabia became the first sovereign issuer in the Middle East and North Africa to obtain a combined loan with a leading international financing structure that combines the green financing principles supported by the Export Credit Agency. This came within the framework of its strategy to expand sources of financing and increase its investor base.

Despite the availability of quick and easy sources of financing, Saudi Arabia chose a rare mixture of loans that promote the principles of “sustainable environmentally friendly financing.” The green loan supported by the Export Credit Agency came in the amount of $258 million.


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