Structural transformation underway: How Saudi Arabia is developing its debt markets

This is a thought leadership report issued by the S&P Global Institute. This report does not constitute a rating action, neither was it discussed by a rating committee.

Funding needs and regulatory push as key drivers

The implementation of Vision 2030 has generated significant funding requirements over the past few years. Saudi banks increased their total lending book by almost $400 billion between 2020 and 2025, averaging annual credit growth of about 13%, compared with deposit growth of 8.5%, according to the Saudi Central Bank. Consequently, banks increasingly tapped international capital markets, and the banking system moved from its traditional net external asset position to a net external liability position in 2024. This shift was accompanied by a notable increase in the ratio of private sector claims to total deposits, which stood at about 108% at year-end 2025. The net external liability position as a percentage of total assets was about 4%. 

Saudi Arabia introduced its Financial Sector Development Program in 2018 to advance its financial markets. Many regulations have since been launched, including the approval of a regulatory framework allowing nonresident foreign investors to directly invest in the country’s equity market starting in February 2026. 

Strong momentum in the foreign-currency debt capital market

We estimate that between 2017 and 2025, Saudi nonfinancial corporates issued about $82.3 billion in foreign-currency debt. This cumulative figure represents under 7% of the country’s estimated 2025 GDP. Companies in which the Public Investment Fund (PIF) — Saudi Arabia’s sovereign wealth fund — has a direct or indirect stake accounted for $74.7 billion, or almost 90% of total issuances. Saudi Aramco alone issued $47 billion. For this publication, direct issuances by the PIF were excluded from corporate issuances in these statistics because we view them as part of the general government umbrella. PIF holds stakes in some of the country's largest companies, including Aramco, Maaden, Saudi Energy (formerly Saudi Electricity Co.) and Saudi Telecom Co. In addition to its own debt issuances, the sovereign wealth fund has brought several of its portfolio companies to the equity and debt capital markets. In the coming years, we expect more companies from the PIF portfolio to enter the markets, subject to market conditions. 

Local-currency corporate debt capital market at a nascent stage  

While Saudi Arabia’s local-currency corporate debt capital market, including financial institutions, is nascent, authorities aim to develop a liquid market with diverse issuers and investors. 

Outstanding issuance at year-end 2025 totaled about $35.3 billion, up from $15.5 billion in the first quarter of 2020. We estimate that Saudi Arabia’s domestic corporate bonds, including those of financial institutions, comprised about 2.8% of the country’s estimated 2025 GDP, visibly below other key emerging markets. Saudi financial institutions are the main investors and tend to hold the securities until maturity. 

A developed local-debt market enables issuers to access different pools of capital with varying terms and conditions to meet diverse financing needs. 

While the Saudi debt capital market is dominated by highly rated state-owned enterprises, we expect this to gradually change. It is an important sign of maturity for a debt capital market to have ratings across the broader spectrum. The evolution of ratings, reflecting a broad distribution of credit quality, may happen more quickly in Saudi Arabia than in other markets, given economic transformation expectations and associated funding needs.

In addition to the local- and foreign-currency debt markets, Saudi Arabia is developing its residential mortgage-backed securities market.

Securitization offers an alternative funding source to Saudi banks, combining liquidity mobilization, capital relief and a potential reduction in sectoral lending book concentration. Saudi Arabia’s development of sharia-compliant structured finance solutions and update of its securitization framework could help drive domestic and international capital market financing solutions across sectors.

As of June 30, 2026, Saudi banks’ mortgage lending exceeded $200 billion, according to Saudi Central Bank data. Despite volatility, the Saudi housing market’s fundamentals remain robust due to urbanization, population growth and government policies that support home ownership. Real estate retail lending expanded 3.7% year over year in the second quarter of 2026 and is expected to grow nearly $15.6 billion annually, equating to a 7.8% compound annual growth rate from 2024. 

In countries where domestic corporate debt capital markets have progressed, dedicated local institutional investors have contributed to market depth and liquidity, making them more attractive to foreign investors.

For example, in Chile, one key milestone was the adoption of a fully privatized pension system in 1981, based on defined employee contributions, which included the mandate to invest in local capital markets. As the assets under management of private pension funds increased, strong demand for local assets supported the growth of the local bond market. 

Similarly, local institutional investors played a crucial role in developing the South African market. South Africa’s financial institutions are well developed and are key investors, with domestic assets as a percentage of GDP at nearly 100%, according to S&P Global Ratings data.   

Growing the institutional investor base is a key focus for Saudi Arabia. The country’s asset management sector expanded by an average of about 12% annually over 2015-2024, while total assets under management reached over $330 billion by year-end 2025, according to Capital Market Authority statistics.

The role of bond indexes in capital markets development

A major milestone for Saudi Arabia’s debt capital markets was the establishment of a sovereign yield curve by the Ministry of Finance via the National Debt Management Center. By issuing riyal-denominated sukuk monthly, the initiative established a local-currency sovereign yield curve for nonsovereign issuers to benchmark against.

Saudi Arabia diversifies its debt portfolio between domestic and international financing, with US dollar-denominated debt as the primary source of international issuances. Dollar-denominated bonds and sukuk from Saudi Arabia are tracked by the iBoxx USD Emerging Markets Broad Saudi Arabia Sovereigns Index.

Bond indexes support capital market development by providing benchmarks that help market participants gauge performance and build confidence through established track records. They define investable universes with transparent methodologies, enabling investors to understand market dynamics while accommodating their specific constraints.

The iBoxx Tadawul SAR Government Sukuk Index was launched in 2020 in collaboration with the Saudi Stock Exchange, or Tadawul, to track the performance of riyal-denominated domestic government sukuk. It is the first dedicated riyal-denominated government debt index aimed at developing and improving transparency in the Saudi capital market while facilitating broader participation by domestic and international investors. Sukuk comprises over 99% of Saudi Arabia’s riyal-denominated government debt issuances.

Over the past five years, the composition of issuers in the Saudi dollar-denominated debt market has diversified. Sovereigns continue to represent the largest segment, but their share of the overall index market value has declined to less than 50%, while the shares of financials and subsovereigns have increased. This shift reflects the growing participation of banks and government-backed entities in the debt capital market to secure funding for the Vision 2030 initiative.

As local funding conditions evolve, more Saudi corporates are considering capital markets to diversify their funding base, supporting foreign-currency issuance activity. Typically, markets start with highly rated public sector entities before maturing through diversification to a broader range of private sector and lower-rated entities. For Saudi Arabia, we forecast that private sector entities will follow suit and increasingly issue foreign-currency debt over the next few years, resulting in a wider distribution of credit ratings among active issuers.

In addition, Saudi authorities continue to support the development of the nascent domestic debt market. Future regulatory developments may also support growth, and the ratio of domestic corporate bonds to GDP could increase from current levels. However, current geopolitical developments could negatively affect investor sentiment for the region.