The UAE’s Ministry of Finance recently announced that the government treasury bonds program and the dirham-denominated Islamic treasury sukuk program have achieved exceptional success since their launch in 2022.
By the end of August 2024, the programs saw the issuance of treasury bonds worth AED11.2 billion ($3.05 billion) and Islamic treasury sukuk worth AED13.8 billion ($3.76 billion), totaling AED25 billion ($6.81 billion).
“The UAE continues to cement its position as one of the most competitive and advanced economies in the world. This success reflects the country’s strong creditworthiness and substantial economic capabilities, which support the robust performance of the financial sector and contribute to sustainable growth” stated Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, First Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance.
Total outstanding bonds at AED6.35 billion
The ministry added that it had settled the value of its two-year treasury bonds, amounting to AED4.85 billion in May 2024, bringing the total outstanding bonds to AED6.35 billion. As a result, the total outstanding domestic public debt for both programs reached AED20.15 billion by the end of August 2024.
The UAE has also achieved a sovereign credit rating of AA- with a stable outlook from Fitch Ratings. Moreover, it received an Aa2 rating in creditworthiness, the highest sovereign credit rating in the region, with a stable outlook from Moody’s.
This reflects the high confidence in the UAE’s investment environment as one of the most competitive and advanced economies globally. Moreover, it underscores the ministry’s commitment to efficiently developing and diversifying federal resources to maintain high standards for the UAE’s financial system.
UAE’s treasury bonds program
In 2022, the UAE launched the treasury bonds program in collaboration with the central bank as the issuance and payment agent. The program sought to issue government treasury bonds (T-bonds) denominated in the local currency. These bonds are settled through a local platform, “Bloomberg Auction System” which follows international standards, and is operated by Euroclear Bank.
The program saw the issuance of bonds worth AED9 billion in 2022 in six auctions worth AED1.5 billion each. In 2023, two additional auctions worth AED2.2 billion also launched. This brought the total issuance under the treasury bonds program to AED11.2 billion.
On May 11, 2024, the ministry repaid AED4.85 billion of two-year treasury bonds, bringing the total outstanding bonds to AED6.35 billion.
In addition, the UAE issued the first five-year treasury bond auction in September 2022. Total bids amounted to AED8.60 billion across two tranches (two years and five years), surpassing the subscription size by 5.7 times.
Islamic treasury sukuk program launch
Following the success of the government treasury bonds program, the UAE government announced the launch of the dirham-denominated Islamic treasury Sukuk program.
The UAE government launched five auctions for the Islamic treasury sukuk program in 2023. Each auction was worth AED1.1 billion, totaling AED5.5 billion.
In 2024, the ministry also held six additional auctions under the program, with a total of AED8.3 billion. This launch brought the total outstanding under the Islamic treasury sukuk program to AED13.8 billion. With that, the total internal public debt for both programs reached AED20.15 billion.
T-bonds, T-sukuk diversify funding sources
T-bonds and T-sukuk contribute to building a local currency bond market and developing the medium-term yield curve. The UAE issues the bonds and sukuk in tranches with varying maturities of two, three and five years. Moreover, it plans to issue longer-term bonds and sukuk in the future.
Issuing these bonds and sukuk in the local currency helps diversify funding sources, stimulate the local financial and banking sector, and provide secure investment alternatives for local and foreign investors in the local currency. In addition, they enhance the UAE’s ability to meet future funding needs in the local currency. This, in turn, strengthens the local financial market and improves the overall investment environment.
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