Driving this trend are the positive balance sheets that several countries in the region are expected to show this year.
"This is a trend we have seen throughout EEMEA, sovereigns are borrowing less, while corporates are borrowing more. I think 2007 will see this trend continue," says Maryam Khosrowshahi, managing director in debt capital markets and global fixed income at Citi.
Reasons
Standard and Poor’s report, Middle East and Africa sovereign issuance outlook: refinancing to dominate borrowing in 2006, included data for the 24 rated countries in the region. The report showed that in 2006 net borrowing for these countries reached $15 billion, but only $6 billion is expected in 2007, as borrowing needs decreased for sovereigns and refinancing became the main reason to go to the markets.
"Although declining, continued high oil prices have had a positive fiscal effect on many countries in the region, especially in the Gulf states, which are all expected to sustain fiscal surpluses in 2007," says Farouk Soussa, credit analyst at Standard & Poor’s. "Encouragingly, these unforeseen oil revenues have been mainly set aside in stabilization funds for future use, or used to pay down domestic debt, so that borrowing by these countries in 2007 is purely to finance amortizations and to maintain a level of government debt necessary for monetary policy purposes."