Gulf states may struggle to refinance $94bn of debt

Gulf Cooperation Council (GCC) countries may struggle to refinance $94bn of debt in the next two years, as the region faces slowing growth, rising rates and rating downgrades, says HSBC. The GCC is an economic and political alliance comprising Saudi Arabia, Kuwait, UAE, Qatar, Bahrain and Oman. These countries are hugely reliant on oil exports and have suffered as oil prices have tumbled by 70% since 2014. 

HSBC: Gulf Cooperation Council states face $94bn looming debt crunch

One of the world's biggest banks has warned a $94bn debt crunch is looming over Arab countries.

HSBC said that sovereign, financial and corporate borrowers in the Gulf Cooperation Council (GCC) region must repay or refinance $94bn of bonds and loans in 2016 and 2017, Arabian Business reported. The GCC is an economic and political alliance comprising Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman.

The countries, which are heavily reliant on their oil exports, have suffered as crude prices tumbled around 70 per cent since the middle of 2014. They could be forced to make difficult choices if the black stuff fails to recover in the next five years.

The UAE makes up the biggest chunk of repayment or refinancing obligations during this period, HSBC said. It's followed by Bahrain and Qatar. By sector, financial institutions, sovereign wealth funds and energy borrowers owe the most debt, in that order.

"We remain confident that these funding gaps will be covered. However, expectations that they will be part-financed through the sale of sovereign US dollar debt will complicate efforts to refinance existing paper that matures over 2016-17," the report’s author Simon Williams, HSBC’s chief economist for the Middle East, said.

Nevertheless, meeting their debt obligations without dipping into sovereign wealth fund capital is going to be more difficult, given the damage wrought by low oil prices on GCC countries' balance sheets.

"With the Gulf acting as a single credit market…the refinancing challenge will likely be much more broadly felt, with its impact compounded by tightening regional liquidity, rising rates and recent downgrades by international rating agencies."