Oman, Yemen may issue sukuks

Oman's government may issue an international sovereign bond and an Islamic bond next year, its central bank chief Hamood Sangour Al Zadjali said on Sunday.

He said it was still too early to provide details on the size of the bonds. His comments were in line with previous remarks by government officials; the country faces increasing pressure on its state finances because of rising expenditure, which is expected to prompt it to return to the international debt market for the first time since 1997.

"The planned sovereign bond is still in discussions. We could issue next year," Zadjali told Reuters on the sidelines of a meeting of Arab central bank governors in Abu Dhabi.

Meanwhile, Oman aims to develop its fledgling Islamic finance industry, and a debut issue of sukuk by the government would be a major step towards that.

Zadjali also said Oman planned a domestic issue of government development bonds worth 100 million rials ($260 million) in the fourth quarter of this year.

"It is for development purposes as well as for projects," he said.

He added that Oman's banking sector was expected to grow 15-20 per cent this year in terms of assets, while banking sector profits were expected to grow by 10-20 per cent.

Yemen may issue sukuk to fund oil product imports

Yemen's government may issue a local-currency Islamic bond this year to finance its imports of petroleum products, its central bank governor Mohammed Awad bin Hamam said on Sunday.

"We might issue a sukuk during the coming short period," Hamam told Reuters on the sidelines of a meeting of Arab central bank governors in Abu Dhabi.

He said the sukuk could be worth about 50 billion Yemeni rials ($233 million) and use a salam structure, which resembles a forward contract in conventional finance.

"It will be around the prevailing interest rate, maybe even less. Maybe it will be around 10 per cent, something like that," Hamam said, adding that the maturity would be more than one year, perhaps three or five years.

Yemen's economy has improved since 2012 after years of political instability and violence, but the recovery is fragile and the country remains the second-poorest Arab state after Mauritania.

Asked whether the central bank might cut interest rates again in coming months, Hamam replied: "Of course, yes, but we have to look at that. We have to watch inflation. Inflation is only one factor. We have looked at more than one factor."

The central bank last cut its key interest rate in February, by 3 percentage points to 15 per cent, but inflation hit a 15-month high of 14.2 per cent in May.

"I guess inflation when you look at it from the commodity aspect, it is not that high. By the end of the year it will amount to something around 6-8 per cent, I guess," Hamam said.

"From December to June it is not more than 12 per cent, so maybe by the end of the year it will be around 6-8 per cent."

Yemen's recovery plans are heavily dependent on foreign aid; Saudi Arabia provided a $1 billion loan to beef up Yemen's foreign reserves last year but other foreign aid, out of $7.9 billion pledged by donors in 2012, has been slow to arrive.

Hamam said the Saudi Arabian deposit was the only major, recent boost to foreign reserves. The central bank's gross foreign assets fell to a 10-month low of $5.7 billion in June, or 6.1 months of imports.

That level of reserves is comfortable and "when the donor money will be flowing in, the level of reserves will be increasing," he said.

Hamam said the International Monetary Fund expected Yemen's gross domestic product to grow around 6 per cent this year, a prediction with which he agreed.

 

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