UAE debt market registers 13.1% YoY growth, Fitch Ratings says

UAE debt capital markets experienced robust growth by the end of Q3 2024, according to Fitch Ratings, increasing by a record 13.1 per cent year-on-year (YoY) to reach $294.4bn.

The growth in the UAE’s debt capital markets, with sukuk accounting for 20 per cent of the total, demonstrates the country’s expanding financial landscape and its strategic role in the global Islamic finance market.

“The UAE is a pivotal player in the global sukuk market, holding a 6.6 per cent share of the global outstanding sukuk. This places the UAE fourth globally in all currencies, after Malaysia, Saudi Arabia, and Indonesia,” Bashar Al Natoor, managing director & global head of Islamic Finance at Fitch Ratings, said in a statement to Emirates News Agency.

The UAE is a major US dollar debt issuer in emerging markets (excluding China), ranking third behind Saudi Arabia and Brazil with an 8.9 per cent share in H1 2024. The Gulf state was also the second-largest issuer of ESG bonds and sukuk in emerging markets (outside of China) after Brazil in the first nine months of the year.

“Regionally, the UAE holds the second-largest share of the total GCC outstanding sukuk at 16.2 per cent, after Saudi Arabia’s 71 per cent share,” said Al Natoor.

Following the government’s implementation of the Dirham Monetary Framework, the dirham share in the debt capital markets outstanding rose to 21.1 per cent in H1 2024 from only 0.5 per cent at end-2020.

The government continues to support sustainability initiatives. The securities regulator extended the fee exemption for listing ESG bonds and sukuk in April 2024, which can support ESG issuance.

“The UAE’s debt capital markets are poised for further growth, with projections indicating a potential surge beyond $300bn by the end of 2024. The expansion is driven by the UAE’s strategic focus on enhancing its DCM, which continues to attract both regional and international investors,” Al Natoor added.

Meanwhile, Islamic banks contribute significantly to the UAE’s financial landscape, accounting for 29 per cent of total sector financing at the end of H1 2024.

The Shariah-compliant banks registered 5.7 per cent growth in the first half of 2024, slightly outpacing conventional banks. Fitch projects continued outperformance by Islamic banks over the medium term.

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