by Ahliddin Malikov
The lack of physical and technological infrastructure as well as low quality of human resources have led to very low rates of foreign direct investment in developing countries. Indeed, infrastructure projects require huge amounts of investment which governments in those countries cannot fund from their own budgets. Meanwhile, foreign loans from international financial institutions are often high-priced with stringent conditions. Given the importance of infrastructure development for sustainable economic growth, there is a large demand in both emerging and frontier markets for a better alternative to conventional debt instruments. Although many developing countries have started using sovereign sukuk as a fiscal policy tool to achieve economic growth, it is still difficult to find empirical studies that demonstrate the issuance of sukuk for funding infrastructure projects has an impact on economy. Thus, this paper is an endeavour to determine whether sovereign sukuk issuances in infrastructure sector affect economic development of developing nations. The data for five years before and after infrastructure sukuk issuances in two regional sukuk leaders, namely Malaysia and Saudi Arabia were compared by conducting Paired Sample T-Test. The results indicated that there were significant differences in several economic, state financial and social well-being indicators including GDP per capita, Debt per capita, Debt to GDP ratio, Ofiicial reserves and Human Development Index.