July 2025 — Emerging market debt issuance has reached a record-breaking pace in the first half of the year, with sovereign and corporate bond sales surpassing $190 billion. The momentum is being driven by a global search for yield amid stable inflation in advanced economies, softening rate hike trajectories, and rising demand for high-growth, resource-rich issuers. Leading the charge are Middle Eastern economies, with Saudi Arabia emerging as the region’s flagship issuer.

A Rebound Year for EM Capital Markets

After a cautious 2023 dominated by inflation volatility and rate uncertainty, 2025 is proving a year of re-engagement for global investors with emerging market assets. Sovereigns and blue-chip corporates across the Gulf, Sub-Saharan Africa, Southeast Asia, and Latin America are aggressively tapping capital markets to finance fiscal consolidation, climate-linked infrastructure, and post-pandemic industrialisation.

According to regional banking sources, issuance volumes in GCC economies alone account for over $65 billion of the total—led by Saudi Arabia, UAE, and Qatar. The Kingdom of Saudi Arabia has launched a diversified mix of Islamic sukuk, green bonds, and long-dated eurobonds, capitalising on investor demand for energy-transition financing and dollar-alternative assets.

Yield Compression and Investor Appetite

Investors from the US, EU, and increasingly Asia are reallocating from high-grade debt to emerging market credits, encouraged by:

  • Attractive yield spreads over US Treasuries

  • Improved credit fundamentals, especially in oil-exporting economies

  • Stable FX reserves and better monetary policy coordination in key markets

  • A growing number of ESG-aligned debt instruments from sovereigns and quasi-sovereigns

As risk-adjusted returns compress in developed markets, the relative value of EM paper has risen. Sovereign bonds from countries like Indonesia, Vietnam, and Nigeria are being snapped up in primary auctions, often seeing books oversubscribed by 3x or more.

Middle East as the Anchor Region

The Middle East has emerged as the global anchor for new debt issuance. Saudi Arabia alone has issued more than $20 billion in various formats in 2025, supporting both budgetary realignment and giga-project financing linked to its Vision 2030 transformation plan.

UAE entities, particularly in Abu Dhabi and Dubai, have tapped markets for infrastructure funding, while regional corporates like Aramco, ACWA Power, and DP World are issuing debt to finance supply chain and green transition strategies.

This robust pipeline is aided by relatively low debt-to-GDP ratios and strong sovereign wealth buffers, giving these countries space to borrow without immediate credit stress.

Subtle Undercurrents of De-dollarisation

While most EM debt remains dollar-denominated, there are early signs of de-dollarisation creeping into issuance trends:

  • Local currency bonds are gaining traction in India, Brazil, and parts of Africa, buoyed by digital payment rails and bond market reforms.

  • Some Gulf countries are experimenting with euro- and renminbi-linked instruments as part of financial diplomacy.

  • Multilateral issuers and regional development banks are backing currency-swaps and hedging platforms to reduce dollar-dependence.

Though the USD remains dominant, market analysts expect a gradual diversification of reserve currencies and settlement platforms—especially among BRICS+ aligned states.

Risks on the Horizon

Despite bullish momentum, several risks linger:

  • A sudden shift in Fed policy could tighten global liquidity

  • Geopolitical tensions or commodity price shocks may disrupt fragile fiscal balances

  • Over-reliance on external borrowing could expose smaller EMs to rollover risk if sentiment sours

Still, rating agencies have recently upgraded the outlook for several commodity-rich and reform-oriented emerging markets, lending near-term support to sustained issuance.

Bottom Line

With over $190 billion in issuance and surging demand from global investors, emerging market debt markets are having a breakout year. The trend is especially pronounced in the Middle East, where sovereigns are strategically leveraging debt markets to fund diversification and transition goals.

As capital continues to seek yield, and financial instruments evolve to meet new reserve currency realities, 2025 may well be remembered as the year when emerging markets became not just borrowers of necessity, but issuers of choice.