UAE's domestic debt market issuance to hit Dh66.1b in 2025
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.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Etihad
an hour ago
- Al Etihad
S&P Global Ratings assigns AA- Stable rating to Masdar
20 Aug 2025 19:06 A. SREENIVASA REDDY (ABU DHABI)Masdar, Abu Dhabi's flagship renewable energy company, has been assigned a long-term issuer credit rating of AA- with a Stable outlook by S&P Global Ratings, underscoring its financial strength, global reach, and the substantial backing it continues to receive from the emirate of Abu to S&P, the rating reflects Masdar's 'extremely high likelihood of receiving timely and sufficient financial support from the government of Abu Dhabi,' given the company's pivotal role in the emirate's clean energy transition strategy. The stable outlook mirrors that of the sovereign itself, which holds an AA rating with a Stable AA- rating is among the highest grades awarded by S&P, signalling a very strong capacity to meet financial commitments and a low expectation of credit risk. The 'Stable' outlook means the agency expects this strong position to be maintained over the next 12–24 months. For Masdar, the affirmation effectively positions it just one notch below Abu Dhabi itself and places it among the world's most creditworthy renewable energy developers.S&P emphasised the ample evidence of state support for Masdar's growth. 'The group has thus far received over Dh20 billion in equity support from the government to finance its acquisitions,' the report noted. This record of injections highlights Abu Dhabi's readiness to step in with extraordinary support if ever required. 'This results in six notches of uplift from Masdar's stand-alone credit profile of 'bbb-', leading to an 'AA-' long-term issuer credit rating,' the S&P Rating said. Masdar is also benefiting from its pioneering position in green finance. Despite rising leverage, the company raised around Dh10 billion in 2025 through green bond issuances at a coupon rate of only 5%, demonstrating investor confidence and its strong access to capital rating action comes as Masdar accelerates its international expansion. From 2021 to March 2025, the company's gross capacity — including operational, under-construction and committed projects — more than doubled from 15 gigawatts (GW) to 33 GW. Its portfolio spans more than 25 countries and is concentrated in well-proven renewable technologies, particularly utility-scale solar photovoltaic and onshore wind, which together account for over 80% of its generation many of its peers, Masdar follows an investor-led approach, outsourcing operations and construction risks to third-party contractors. S&P pointed to the company's 'large, low-risk asset base' supported by long-term take-or-pay contracts, with about 97% of revenues locked in. These factors, combined with government backing, 'underpin Masdar's sound access to capital markets and good relationships with banks,' the report said. Masdar's ambition remains to increase its portfolio to more than 100 GW by 2030, a target closely aligned with the UAE's national clean energy and net-zero goals. As of March 2025, it had an advanced pipeline of 25 GW, of which 15 GW were already under development.
Khaleej Times
2 hours ago
- Khaleej Times
UAE: S&P assigns AA- rating to Masdar, outlook stable
S&P Global Ratings on Wednesday assigned an 'AA-' long-term issuer credit rating to Abu Dhabi-based renewable energy group Masadar. The outlook is stable. This results in six notches of uplift from Masdar's stand-alone credit profile (SACP) of 'bbb-', leading to an 'AA-' long-term issuer credit rating. 'We think that Masdar has an extremely high likelihood of receiving timely and sufficient financial support from the government of Abu Dhabi. The group has the very important role of leading the emirate's renewable goals, and it benefits from having integral ties with the state government,' the ratings agency said in a statement. Masdar retains priority on the mandate for renewable energy for Abu Dhabi, being a key vehicle for the UAE in achieving its goals of tripling renewable energy by 2030. The UAE government has pledged to make the country carbon neutral by 2050 and plans to invest heavily in alternative energy sources that are both renewable and clean. Masdar benefits from an established global market position in the clean energy development business, a diversified capacity base, and an ambitious growth strategy sponsored by the government. There is ample evidence and a solid track record of state support to accompany Masdar's growth. The group has thus far received over Dh20 billion in equity support from the government to finance its acquisitions on growing platforms. 'We think that the Emirate of Abu Dhabi is willing and able to provide extraordinary financial support,' the ratings agency noted. Masdar's strategy of acting as a platform investor and aggregator has significantly expanded its scale and diversity. From 2021 to March 2025, Masdar's gross capacity (considering operational, under construction, and committed projects) increased to 33 gigawatt (GW) from 15 GW. This trajectory was backed by a dual business model that combines greenfield development with strategic acquisitions — each supported by appropriate funding sources. 'The company has a portfolio of geographically diverse assets in strategic locations across the globe and exposed to well-proven renewable technologies, notably utility-scale solar photovoltaic (PV) and onshore wind capacity, which together account for more than 80 per cent of Masdar's generation base,' S&P Global Ratings said. The continuous support and the privileged access to low-cost financial resources thanks to its government links are a major differentiating factor when assessing the group's financial solidity and capacity to sustain high leverage. 'Despite Masdar's heightened leverage, the company — which is a pioneer in green bond financing in the UAE — managed to raise about Dh10 billion so far in 2025, with a low coupon rate of about 5 per cent,' the agency said. Masdar's strong diversification, government-backed growth model, and hands-off approach to distressed assets all support the deconsolidated financial analysis approach. Unlike many of its peers, Masdar's business model ensures that its financial risk profile is not tied to individual projects or their associated debt. 'Masdar's deconsolidated debt-to-Ebitda is likely to increase to 5.0x-6.0x over 2025 and 2026, from 1.8x in 2024, before falling to 2024 levels as all the development activity Masdar has undertaken over the past year—particularly through the acquisitions of growth platforms — become operational and begin generating cash,' S&P Global analysts wrote.
Arabian Post
4 hours ago
- Arabian Post
Markets can't afford to ignore Bessent's warning shot
US Treasury Secretary Scott Bessent last week made a comment that should have sent markets into deep reflection. Instead, it was largely shrugged off. He suggested that the White House's unprecedented revenue-sharing deal with Nvidia and AMD could be extended to other industries. This single line carries profound implications — and the muted reaction says more about investor complacency than anything else. The arrangement currently in place compels Nvidia and AMD to hand over 15% of certain Chinese sales to Washington in exchange for export licences. Bessent called it a 'model' and a 'beta test.' President Trump reinforced the idea by comparing modified chip exports to the downgraded fighter jets the US sells abroad. If this experiment were to expand to other sectors, it would fundamentally alter how globally active companies interact with the US government. It would rewrite rules of trade, supply chains, and corporate valuations. I said earlier last week that 'overstretched markets are vulnerable to precisely this kind of policy surprise.' We are in a moment where investors are pricing perfection — and a policy template that could be rolled out across industries is anything but perfect. It is disruptive, unpredictable, and open-ended. That should not be ignored. The danger is that investors are fixated on a single theme: the Federal Reserve cutting rates in September. Soft inflation data has all but convinced markets a cut is coming, with futures pricing a 94% probability. Some are even betting on a 50-basis-point move after Bessent himself called on the Fed to be bold. The S&P 500, Nasdaq, Dow, Russell 2000, and MSCI All Country World Index all hit fresh highs on this expectation. In other words, global positioning has become dangerously one-sided. But markets built entirely around one assumption are fragile. Add a new industrial policy template into the mix, one that Washington could apply beyond semiconductors, and the spectrum of possible outcomes broadens dramatically. What makes the situation even riskier is that the rally is already thin. In a healthy, broad-based uptrend, earnings strength is visible across sectors. Today, it's selective. This leaves indices looking strong on the surface while being hollow underneath. When strength is concentrated and liquidity is light, as it often is in August, markets can turn violently. A handful of good sessions convinces traders a durable uptrend has formed, only for sentiment to collapse when the data flow turns against them. This is a textbook environment for sharp reversals. For investors, the critical point is this: Bessent's remarks are not idle speculation. They hint at a framework that could extend beyond chips. If that happens, global business will have to operate under a new set of rules overnight. Revenues, margins, and capital expenditure plans would all need to be reassessed. Cross-border investment flows would feel the impact immediately. The knock-on effects would not stay confined to semiconductors. I don't believe the market is prepared for that possibility. At record highs, optimism is being priced without much thought for what could go wrong. And it is precisely at these moments — when the headlines are euphoric, when positioning is crowded, and when liquidity is thin — that disruptive variables carry the most risk. This is not a call to panic. It's a call to pay attention. Record highs don't reduce risk; if anything, they amplify it. Investors should be reassessing exposure, rebalancing portfolios, and considering what happens if policy, data, or geopolitics break from the script everyone has chosen to believe. Chasing the last leg of this rally on the assumption that nothing can go wrong is the most dangerous move of all. Bessent has effectively fired a warning shot. Whether markets want to hear it or not, investors should be listening.
