The seven individual emirates and the UAE federal government are expected to issue about $18 billion (AED 66.11 billion) of local currency debt in 2025, down from $19 billion in 2024, according to Zahabia Gupta, Director and Lead Analyst for Middle East and Central Asia, S&P.

Abu Dhabi and the UAE federal government are forecast to issue more than $8 billion of local currency debt this year to help develop a domestic yield curve, she added.

About 55% of the debt will be used for refinancing or to roll over maturing debt, Gupta said.

Among the three emirates rated by S&P - Abu Dhabi, Ras Al Khaimah and Sharjah - only Sharjah is expected to issue debt to cover a budget deficit estimated at 6.3% of GDP in 2025. The others are likely to maintain budget surpluses.

However, the country’s domestic debt capital market is still developing, particularly the local currency issuance segment.

Since the federal government began raising debt in 2021, it has issued AED 27 billion of treasury bonds and sukuk in local currency, equating to about 42% of total issuances.

Gupta said that more regular domestic currency issuances by Abu Dhabi and the UAE federal government will help to build a domestic yield curve. 

This will help pricing by banks and corporates, help smaller issuers access the capital markets and diversify the funding base.

“That said, we expect bank funding, along with access to international capital markets, to remain the core funding sources for corporates in the near term,” Gupta noted.

(Editing by Brinda Darasha; [email protected])