ABU DHABI: The UAE’s debt capital markets have shown significant growth with a 13.1 percent year-on-year increase in outstanding debt, reaching US$294.4 billion by the end of the third quarter of 2024, as reported by Fitch Ratings. Bashar Al Natoor, Managing Director and Global Head of Islamic Finance at Fitch Ratings, emphasized the country’s expanding financial landscape and its strategic positioning in the sukuk market during statements to the Emirates News Agency (WAM).
According to Emirates News Agency, Al Natoor highlighted that the UAE holds a 6.6 percent share of the global outstanding sukuk, ranking fourth globally in all currencies after Malaysia, Saudi Arabia, and Indonesia. The UAE also emerged as one of the largest US dollar debt issuers in emerging markets, excluding China, with an 8.9 percent share of the total in the first half of 2024, following Saudi Arabia and Brazil. Additionally, the UAE was the second-largest issuer of ESG bonds and sukuk in emerging markets outside of China, after Braz
il, during the first nine months of 2024.
Regionally, the UAE holds the second-largest share of total GCC outstanding sukuk at 16.2 percent, following Saudi Arabia’s 71 percent share. Al Natoor noted that while sukuk issuance in the UAE amounted to US$9.9 billion in the first nine months of 2024, representing a 13 percent year-on-year decline, this decrease is less steep compared to the 25 percent drop in bond issuance over the same period.
The implementation of the Dirham Monetary Framework led to an increase in the Dirham’s share in the DCM outstanding, rising to 21.1 percent at the end of the first half of 2024 from just 0.5 percent at the end of 2020. The government continues to support sustainability initiatives, and in April 2024, the regulator extended the fee exemption for listing ESG bonds and sukuk, which could bolster ESG issuance.
Fitch Ratings noted that US$26.7 billion of UAE sukuk are rated, with 92.5 percent being investment-grade, dominated by financial institutions holding a 51 percent sh
are, followed by corporates with 21 percent. Investment-grade ratings typically indicate relatively low to moderate credit risk.
Islamic banks play a significant role in the UAE’s financial landscape, with Islamic financing accounting for 29 percent of total sector financing at the end of the first half of 2024. Growth in Islamic financing was 5.7 percent in the first half of 2024, slightly higher than the 5.4 percent growth in conventional banks. Fitch expects Islamic banks to continue outpacing conventional banks in growth in the medium term.
Islamic bank investment in Islamic CDs increased throughout 2024, reaching AED44 billion by the end of the first half of 2024, as reported by the Central Bank of the UAE. These investments are in Islamic CDs as opposed to M-Bills, as Islamic M-Bills have not yet been introduced.
The UAE’s debt capital markets are expected to continue their upward trajectory, with projections indicating a potential surge beyond USD 300 billion by the end of 2024. This growth is attri
buted to the UAE’s strategic focus on enhancing its DCM, attracting both regional and international investors.
Al Natoor concluded by stating that the UAE’s debt capital markets are experiencing robust growth, driven by a balanced mix of sukuk and bond issuances, high investment-grade ratings, and strategic market positioning in both global and regional sukuk markets.