Riyadh - Mubasher: The Saudi programme for the issuance of Islamic bonds (Sukuk) will benefit Islamic banks in the kingdom, according to a recent report by Moody's.

Islamic banks in Saudi Arabia will benefit from an increased profitability after the ministry of finance launched a Saudi riyal sukuk issuance programme, the rating agency said on Friday.

“The issuance is credit positive for Saudi banks because their profitability will benefit from the transfer of their large, low-yielding reserves of cash and placements with the Saudi Arabian Monetary Authority (SAMA) and banks to higher-yielding government Islamic bonds,” the report indicated.

The Saudi ministry of finance announced earlier a 300% oversubscription of SAR 51 billion for its SAR 17 billion issuance.

According to Moody’s, the programme comes at a time when Saudi Arabia is facing financing challenges to bridge the budget deficit, which the agency estimates at 10.7% for 2017.