Fitch: Türkiye to remain major EM debt, sukuk issuer

Fitch Ratings has stated that Türkiye is expected to maintain its position as a key player in the global sukuk and emerging market debt markets in 2026. The credit ratings agency highlighted that the country’s debt capital market is projected to grow further due to factors such as high external financing needs, upcoming debt maturities, increasing fiscal deficits, and efforts to diversify funding sources. These insights come from Fitch’s Debt Capital Market Monitor Report covering the first half of 2026. The report noted that Türkiye’s debt capital market continued to expand, growing by 9% year-over-year to exceed $516 billion by the end of the first half of the year. Despite ongoing volatility linked to conflicts in the Middle East, the market showed resilience. Fitch emphasized that government securities still dominate the landscape, driving much of the growth. During the first six months of 2026, Türkiye emerged as the world’s fifth-largest sukuk market, maintaining its status as one of only three G-20 nations with an active sukuk market. Outstanding sukuk assets saw a substantial increase of 25.8% compared to the previous year, reaching over $41 billion. This growth rate far outpaced the 8% rise observed in the conventional bond market. Sukuk accounted for approximately 14% of total debt capital market issuance during the first half of the year, up from 8% in the same period last year. In terms of currency composition, Turkish lira-denominated securities made up 64% of the debt capital market, while U.S. dollar-denominated instruments constituted 33%. Excluding China, Türkiye ranked as the sixth-largest issuer of U.S. dollar-denominated debt among emerging markets during the first half of 2026, holding a 7.4% market share. Fitch anticipates that the debt capital market will reach approximately $550 billion by the end of the year. According to the report, both banks and corporations are expected to continue accessing debt markets as new financing opportunities emerge. However, investor sentiment and potential increases in regional conflict-related volatility might impact issuance activities. Bashar Al Natoor, global head of Islamic finance at Fitch, pointed out that while Türkiye maintains relatively low government debt and has consistent access to external financing even during stressful times, further regional tensions could affect investor confidence, interest rates, and liquidity. Al Natoor added that foreign investors have shown continued interest in recent Turkish sovereign U.S. dollar sukuk and bonds. However, there has been a decline in foreign participation within the local-currency market. This shift suggests that while international investors remain engaged in certain segments of Türkiye’s debt market, their involvement in domestic currency instruments is diminishing. The outlook for Türkiye’s debt capital market appears positive, supported by its strategic positioning in both sukuk and traditional debt markets. Nevertheless, the potential for increased regional instability poses challenges that could influence future investment flows and market dynamics. As the year progresses, the performance of Türkiye’s financial sector will depend heavily on how effectively it navigates these uncertainties while leveraging its existing strengths in attracting diverse forms of capital.