Abu Dhabi is currently readying a local currency debt issuance, as part of an ongoing effort to develop the UAE’s domestic debt capital markets, with the emirate and the UAE federal government expected to issue some USD 8 bn in AED-denominated debt in 2025 to help support “the building of a domestic yield curve,” according to a research note from S&P Global Ratings.

The UAE could see less debt issuances this year: Individual emirates and the UAE federal government are expected to issue around USD 18 bn in total debt this year, down from USD 19 bn in 2024.

Where the funds will go: Around 55% of the issuances from individual emirates and the federal government will be used for refinancing or to roll over maturing debt, S&P predicts. Sharjah is the only emirate rated by the agency that is expected to issue debt to meet a fiscal shortfall of 6.3% of GDP, while Abu Dhabi and Ras Al Khaimah are expected to maintain a surplus position this year.

This could give smaller issuers greater access to capital markets: The building of a domestic yield curve could be used in the pricing of issuances, and could help smaller issuers access capital markets while also “diversifying the funding base,” according to S&P. However, as far as corporations are concerned, the agency still expects bank funding along with access to international capital markets to remain the core funding sources for the foreseeable future.

Remember: UAE issuers — alongside others in the region like Saudi sovereign wealth fund PIF — have been taking advantage of positive market conditions following weeks of instability with fresh issuances. Earlier this month, the Abu Dhabi sovereign wealth fund ADQ began selling a USD 1 bn dual-tranche bond, while DP World priced a USD 1.5 bn sukuk, and Omniyat Holdings issued its debut USD 500 mn sukuk.

In general, debt issuances this year are likely to be “opportunistic and market dependent,” with emirates expected to maintain “prudent fiscal policies and strong balance sheets.” Abu Dhabi is expected to repay some USD 6 bn in maturing debt, while Dubai is also continuing to pay back debt since the start of the year. However, the latter could see the issuance of more debt in 2026 as a means of funding the expansion of the Al Maktoum International Airport and the renovation of the rainwater drainage network, according to S&P.

The domestic debt market in the UAE has been slow so far — but it appears to be gaining momentum, according to S&P. This is especially important, the agency argues, as “capital markets are volatile in an uncertain global environment , and reliance on international capital markets could expose some issuers to higher borrowing costs,” the note reads. Meanwhile, the UAE’s highly liquid banks should provide strong lending growth in 2025.

***Editor’s note:  A previous version of this article incorrectly stated that AED-denominated debt issuance in the UAE this year is expected to reach USD 18 bn. The correct figure refers to total debt issuance across all currencies, not just AED-denominated instruments.  

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