Boosting Islamic economy: UAE issuing AED1.1 bn T-Sukuk

UAE raised $4 bn through multi-tranche sovereign bonds in 2021
Boosting Islamic economy: UAE issuing AED1.1 bn T-Sukuk
Sukuk to promote economic diversification and inclusion

The UAE government has announced the launch of dirham-denominated Islamic Treasury Sukuk (T-Sukuk) worth 1.1 billion dirhams ($299.5 million), aimed at strengthening the local currency bond market and boosting the Islamic economy.

The T-Sukuk is a financial certificate that will reflect the local return on investment, promote economic diversification, and increase financial inclusion. The certificate will be issued initially in 2/3/5-year tenures, with a 10-year sukuk to follow at a later date. It will be denominated in UAE dirham, helping to develop the local bonds debt market and establish the mid-term yield curve. Furthermore, it will contribute to implementing the new Dirham Monetary Framework (DMF) and establishing the Dirham risk-free pricing benchmark.

Read more: Will Sukuk issuances rise or fall in 2023?

The T-Sukuk will be issued by the Ministry of Finance (MoF) in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and paying agent. It will help to diversify financing resources, boost the local financial and banking sector, and provide secure investment alternatives for local and foreign investors.

The UAE government’s sukuk follows the successful launch of the AED1 billion dirham-denominated sukuk by Emirates Islamic Bank in February, which was oversubscribed 2.5 times, indicating robust demand for such financial instruments.

Khaled Mohamed Balama, governor of the Central Bank of the UAE, stated that issuing Islamic treasury sukuk would strengthen the infrastructure for the development of the Islamic financial sector.

According to Moody’s Investors Service, long-term gross sukuk issuance volumes fell by 22% to $80 billion in 2022, primarily due to significantly higher energy-related government revenue that pushed fiscal deficits into surpluses for most GCC sovereigns. However, it expects long-term sovereign sukuk issuance to stabilise in 2023 at around $80 billion, before rising to around $80-85 billion in 2024.

In 2021, the UAE raised $4 billion through the issuance of multi-tranche sovereign bonds, marking the first time it issued bonds at the federal level.

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