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The UAE’s debt capital market (DCM) expanded in 1Q 2025, setting the stage for what Fitch Ratings expects to be the most active among emerging markets globally, particularly when it comes to sukuk, it said in a note. The UAE maintained its position as the second-largest DCM in the GCC and the fourth-largest emerging market USD debt issuer (excluding China) in 1Q 2025, with the DCM expanding 8.3% y-o-y to USD 309 bn, and issuances surging by 109% y-o-y to USD 29.1 bn.
The country’s sukuk issuances increased by 22.6% y-o-y to USD 4.9 bn in 1Q 2025, while bond issuances rose by 145%. UAE-based entities issued 6.5% of global outstanding sukuk by the end of 1Q 2025, with sukuk representing 18% of the country’s total DCM outstanding.
USD-denominated issuances dominated: Some 68.5% of issuances were denominated in USD. Meanwhile, AED debt issuances represent about a quarter of the UAE’s DCM as of the end of the quarter, with the government focused on issuing treasury sukuk rather than bonds. However, AED-denominated issuances by UAE corporates and banks remain scarce, along with a lack of Islamic alternatives to AED treasury bills.
As of the end of 1Q 2025, ESG debt outstanding topped USD 25 bn, marking a 30% jump y-o-y. Sukuk led the charge, soaring more than 40%.
But new issuance was not as lively: ESG debt issuance hit just USD 1.2 bn in 1Q — down 40.7% y-o-y — and it was all sukuk. Traditional ESG bonds? None were issued last quarter.
Debt capital markets are expected to see continued strong issuance growth throughout 2025, with projections for the market to expand to USD 350 bn in 2026. Growth drivers include funding diversification, upcoming debt maturities, project and infrastructure financing, regulatory reforms, and Islamic-finance ecosystem development. Fitch also expects Nasdaq Dubai to remain among the top listing centers globally for USD sukuk.
Looking ahead, higher tariffs could indirectly fuel greater DCM activity in the UAE, as weaker global demand driven by tariff-induced costs puts downward pressure on hydrocarbon prices. However, tariffs are not expected to directly affect the credit profiles of the UAE or other GCC countries.
REMEMBER- The agency previously had a strong outlook for the UAE’s debt capital markets in 2025, expecting it to reach USD 300 bn this year and surpass USD 400 bn over the next few years. Separately, the UAE has emerged as the world’s top-performing sukuk market since Trump’s return to the White House, outpacing even the US, as investors look towards EMs with strong fundamentals for tariff-safe assets.
