According to Amac News: Global credit rating agencies such as Standard & Poor’s and Fitch have predicted that the reliance on this issuance will increase in the future, driven by efforts to diversify funding sources and promote sustainable investments.
While the majority of large project financing still relies on traditional methods, these initiatives have helped grow the issuance market by creating demand for innovative and sustainable sources of financing in recent years, said Bashar Al-Natour, Managing Director and Head of Fitch Islamic Finance Group.
He stressed that sukuk and bonds have been part of the financing of some past projects.
Al-Natur predicted that the reliance on bonds and sukuk to finance projects will increase in the coming years, as public and private entities in the UAE and other regional markets seek to develop alternatives to traditional financing instruments.
He cited several projects that are set to be developed in the coming years, including real estate, infrastructure and renewable energy projects.
In Dubai, for example, the infrastructure sector will account for 46 percent of total government spending in the 2025-2027 budget, which includes projects such as roads, tunnels, bridges, transportation systems, treatment plants, parks, renewable energy stations and stormwater drainage networks.
In addition, the Al Maktoum Airport Expansion Project, announced last year, is one of the key initiatives aimed at improving the quality of life and promoting smart and sustainable mobility in the emirate.
Meanwhile, Zahabia Gupta, director and senior analyst for the Middle East and Central Asia at S&P Global Sovereign Ratings, said bond issuance in the UAE will increase over the next two to three years, partly due to strong public investment plans.
These plans include the $35 billion expansion of Al Maktoum Airport and Dubai’s $8.2 billion stormwater drainage network, which is set to be gradually completed by 2033.
She also explained that lower interest rates will help increase lending to businesses and individuals, including housing finance.
At the federal level, Gupta noted that the UAE government has started issuing foreign currency bonds since 2021, followed by local treasury bills in May 2022 and local sukuk in April 2023. These issuances are aimed at supporting the development of capital markets in the UAE and helping to create a yield curve for non-sovereign issuers.