According to Fitch Ratings, the UAE is one of the biggest emerging market issuers of US dollar debt, with its outstanding debt capital market (DCM) expected to reach USD 300 billion between H2 2024 and H25.
In the first half of 2024, the United Arab Emirates’ share of dollar debt issuance was 8.9%, slightly less than that of Saudi Arabia (17.4%) and Brazil (9.4%).
At end-H1 2024, DCM outstanding increased to USD 281 billion, a year-over-year (YoY) increase of 11.8%.
“The DCM structural reforms, the implementation of the Dirham Monetary Framework and resilient investor appetite have led to significant growth over the past five years,” Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings said, as reported by Zawya.
He added that the investor base is heavily concentrated in banks and that most corporates prefer bank financing over bonds or sukuk, but that the dirham market is still in its infancy.
Sukuk issuance in all currencies increased by 9.8% year over year in H1 2024, surpassing the decline of 44.3% in bond issuance. Fitch rates sukuk issued in the United Arab Emirates at USD 26.5 billion, of which 94.3% are investment-grade.
ESG debt issuance slowed by 35% YoY to $3.3 billion in H1 2024 after the COP28 in 2023, with the majority (67.5%) being in sukuk format. The rating agency projects that the UAE government’s total debt will account for 24% of GDP, by the end of 2024.
Every emirate has a different debt profile, with Sharjah having more debt than the others. According to Fitch, Dubai paid off AED 29 billion in market and private debt last year. It anticipates deficits in Ras Al Khaimah and Sharjah but surpluses in Abu Dhabi and Dubai.
Meanwhile, the senior unsecured and long-term issuer default ratings of Etihad Airways PJSC (Etihad) have been raised from “A” to “A+” by Fitch Ratings.