Today's Edition
A.SREENIVASA REDDY (ABU DHABI)
The UAE debt capital market (DCM) is likely to reach $350 billion over 2025–2026, after reaching $309 billion outstanding at end of Q1 2025, Fitch Ratings said in a report.
Outstanding debt issuances at end of Q1 2025 are up 8.3% year-on-year (YoY), of which 68.5% was dollar-denominated. All-currency DCM issuance in Q1 2025 rose 109% YoY to $29.1 billion, but was down 35% on Q4 2024.
UAE-based entities were the fourth-largest Emerging Market (EM) dollar debt issuers (excluding China), accounting for 7% of EM US dollar debt issuance in Q1 2025, behind Saudi Arabia, Brazil, and Mexico, Fitch Ratings said. The UAE has the second-largest DCM among GCC countries.
“Growth fundamentals for the UAE debt capital market (DCM) remain intact, with issuers from the country likely to remain among the largest in emerging markets (EM) and among the largest sukuk issuers globally,” Fitch Ratings said in the report.
“Issuance growth in 1Q25 was notable, and we expect it to continue in the rest of 2025,” Fitch Ratings said.
Hydrocarbon prices may come under strain due to weaker demand, which could further raise the UAE’s DCM activity. Fitch reduced its Brent crude oil price assumption for 2025 to $65 a barrel from $70 in mid-April. “UAE banks and corporates are likely to continue to diversify their funding through sukuk and bond issuance,” the report said.
UAE-based entities are among the largest sukuk issuers and investors globally, with 6.5% of global sukuk outstanding at end-Q1 2025. Nasdaq Dubai will remain among the top listing centres for dollar sukuk globally. UAE Islamic banks are also significant arrangers of dollar sukuk issuances, having facilitated nearly 20% of these issuances worldwide in 2023–2024, according to the central bank.
The sukuk share of DCM outstanding reached about 18% at end of Q1 2025. Sukuk accounted for close to 50% of dollar issuance in Q1 2025 (Q1 2024: 40%). Sukuk issuance in all currencies in Q1 2025 grew 22.6% YoY to $4.9 billion, while bonds were up by 145%.
Fitch rated $28 billion of UAE sukuk at end of Q1 2025, 92.1% of which was investment grade, with 39.2% in the “A” category, 34.5% in the “BBB” category, 18.4% in the “AA” category, 6.3% in the “BB” category, and 1.6% in the “B” category. All sukuk issuers have a Stable Outlook. No rated sukuk or bond defaulted in 2024–Q1 2025.
The dirham’s share in the DCM expanded to 24.9% at end of Q1 2025 (2020: 0.5%). The federal government continues to issue dirham treasury sukuk, rather than dirham treasury bonds. Dirham issuances by UAE corporates and banks are rare, apart from government issuance which has strong investor demand.
ESG debt exceeded $25 billion outstanding at end of Q1 2025, up around 30% YoY, with sukuk accounting for above 40%. In Q1 2025, ESG debt issuance reached $1.2 billion (down 40.7% YoY), all in sukuk, but there were no ESG bonds issued in Q1 2025.
