UAE Treasury Bonds & Sukuk Programs Strengthening Investment Appeal

The UAE Ministry of Finance reported raising 25 billion dirhams (US$6.81 billion) through government bonds and dirham-denominated Islamic Treasury Sukuk Programs, launched in 2022.

The ministry indicated that by the end of August, the programs had collectively raised the total amount, reflecting strong investor confidence and reinforcing the UAE’s position as a competitive global investment hub.

To date, 11.2 billion dirhams (US$3.05 billion) worth of government treasury bonds and 13.8 billion dirhams (US$3.76 billion) in Islamic sukuk have been issued under the two initiatives.

In May, the ministry repaid 4.85 billion dirhams (US$1.32 billion) in two-year treasury bonds, bringing the total outstanding bonds to 6.35 billion dirhams (US$1.73 billion).

The UAE was the second-largest issuer in the GCC bond market during the first half of 2024, raising US$20.6 billion through 65 issuances, up from US$15.4 billion and 58 issuances in the same period last year.

This accounted for 27 percent of the total value of GCC bonds and sukuk. Saudi Arabia led the market, raising US$37 billion through 44 issuances.

The combined outstanding public debt for the treasury bonds and Islamic Treasury Sukuk Programs now stands at 20.15 billion dirhams (US$5.49 billion).

These programs were developed in collaboration with the Central Bank of the UAE, which acts as the issuance and payment agent. Settlement is conducted through a local platform that meets international standards, ensuring transparency and efficiency in the bond and sukuk issuance process.

The ministry’s efforts have been supported by major banks, including Emirates NBD, Abu Dhabi Commercial Bank, First Abu Dhabi Bank, and others, serving as primary treasury bond distributors.

Demand for each auction has been exceptionally high, with bids frequently exceeding the subscription sizes several times, a reflection of the strong market appetite for UAE debt instruments.

The program’s success has helped the UAE maintain high sovereign credit ratings, with an AA score from Fitch Ratings and an Aa2 standing from Moody’s, both with a stable outlook.

This financial credibility, alongside robust economic policies, has further enhanced the UAE’s attractiveness as an investment hub.

In addition to boosting investor confidence, these bonds and sukuk are playing a crucial role in developing a local currency market and establishing a medium-term yield curve.

The bonds are issued with maturities ranging from two to five years, with plans to introduce longer-term bonds in the future.

This strategy aims to diversify the UAE’s funding sources, stimulate the domestic financial and banking sector, and provide secure investment alternatives for local and foreign investors.

By issuing these bonds and sukuk in the local currency, the UAE is positioning itself to better meet future funding needswhile strengthening the regional financial market.

The Ministry of Finance continues pursuing initiatives to enhance the country’s economic resilience and contribute to its long-term sustainable growth.