UAE Debt Capital Market Exceeds $250 Billion

Fitch Credit Rating Agency said that the debt capital market in the UAE exceeded $250 billion by the end of the first half of 2023, and it expected it to exceed $300 billion by 2030. 

This comes is in light of the efforts of debt issuers to diversify their sources of financing, and the government’s initiative to develop the debt market.

Sukuk issuances in all currencies increased by 52.9% in the first half of this year on an annual basis to about $6.7 billion. Bond issues rose by 5.7% to reach $60 billion. Sukuk issuances rebounded to reach 35.1% of capital market issuances in US dollars at the end of the first half of the year, compared to 24% at the end of last year, while bond issuance accounted for the remaining percentage.

Sukuk issuers were able to adapt the Central Bank’s requirements to comply with Islamic Sharia standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions, which were introduced in 2021. The federal government switched from issuing dirham bonds to issuing sukuks in the period from May to December 2023.

Fitch expects the UAE's combined debt to remain stable at 31.5% of GDP in the period between 2023 and 2025, compared to 30% in 2022, and despite the expectation of a slight increase, it is still less than the average sovereign debt of countries in the "AA" rating category. The amount is 44%. The agency also expected that Abu Dhabi and Dubai would refinance outstanding debts, and Sharjah would also borrow to cover the budget deficit.

Fitch rated UAE sukuks worth $20.5 billion, 90.5% of which were investment grade.