UAE's domestic debt market issuance to hit Dh66.1b in 2025
The UAE is accelerating efforts to deepen its domestic debt capital market, with Abu Dhabi and the federal government set to issue over Dh29.4 billion ($8 billion) in local currency debt in 2025, according to S&P Global Ratings.
This strategic push aims to build a robust domestic yield curve, reduce reliance on volatile international markets, and foster financial resilience across the emirates.
S&P Global Ratings projects that the UAE federal government and individual emirates will collectively issue approximately Dh66.1 billion ($18 billion) in local currency debt this year, a slight dip from Dh69.7 billion ($19 billion) in 2024. 'About 55 per cent of this will refinance or roll over maturing debt,' said S&P analyst Zahabia Gupta.
Among the rated emirates — Abu Dhabi, Ras Al Khaimah, and Sharjah — only Sharjah is expected to issue debt to address a fiscal deficit, projected at 6.3 per cent of GDP in 2025. Abu Dhabi and Ras Al Khaimah, bolstered by fiscal surpluses, will focus on issuances based on opportunities.
The UAE's domestic debt market, though still nascent, is gaining traction. Since 2021, the federal government has issued Dh27 billion ($7.3 billion) in treasury bonds and sukuk in local currency, accounting for 42 per cent of total issuances. Sharjah has also been active, issuing Dh1 billion in long-term sukuk in July 2024 and reissuing Dh7 billion in short-term sukuk in May 2024. However, most emirate and federal debt remains U.S. dollar-denominated and held externally, exposing issuers to global market volatility.
Sharjah's net government debt stood at 50 per cent of GDP and an interest burden consuming 30 per cent of revenues — one of the highest among S&P-rated sovereigns. Despite this, its recent sukuk issuances were well-received, signalling market confidence.
The UAE's well-capitalised banking sector, with rising deposits and healthy loan-to-deposit ratios, provides a safety net. A 2025 report from Moody's Analytics notes that UAE banks' liquidity ratios improved by eight per cent in 2024, positioning them to support lending growth. In extreme scenarios, S&P expects Abu Dhabi-backed federal support for struggling emirates.
Lower oil prices have not deterred fiscal prudence. Abu Dhabi may repay part of its Dh22 billion ($6 billion) debt maturing in 2025, while Dubai continues deleveraging, repaying Dh4.4 billion ($1.2 billion) in Q1 2025. However, Dubai could ramp up borrowing from 2026 to fund major projects like the Al Maktoum International Airport expansion and rainwater drainage upgrades, according to a Bloomberg report.
Ras Al Khaimah, meanwhile, issued a Dh3.7 billion ($1 billion) 10-year sukuk in March 2025 to refinance maturing debt, with tourism projects largely funded by government-related entities to limit fiscal strain.
Regular local currency issuances by Abu Dhabi and the federal government are pivotal for establishing a domestic yield curve, which could streamline pricing for bank and corporate issuances and enable smaller issuers to tap capital markets.
A 2025 Fitch Ratings report highlights that domestic bond issuances could reduce borrowing costs for UAE corporates by 10–15 per cent over the next five years. However, S&P anticipates that international markets and bank funding will remain dominant for corporates in the near term.
The UAE's push to develop its domestic debt market reflects a broader vision of economic diversification and financial stability. By fostering local currency issuances, the emirates are not only shielding themselves from global market volatility but also paving the way for a more inclusive and dynamic capital market ecosystem.
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