UAE mega projects, sustainability boost bonds, sukuk issuances
UAE's Mega Projects and Sustainability Drive Boost in Bonds and Sukuk Issuances
The United Arab Emirates (UAE) is experiencing rapid growth in mega projects across sectors like infrastructure, renewable energy, and real estate, with a strong focus on sustainability. This strategic vision is driving an increase in sukuk and bond issuances, as noted by global credit rating agencies Standard & Poor's and Fitch.
Key Drivers of Growth
Bashar Al Natoor, Managing Director and Global Head of Fitch Ratings' Islamic Finance Group, highlighted that while traditional financing methods still dominate, there is a growing demand for innovative and sustainable funding sources. He predicts that reliance on bonds and sukuk will increase as the UAE and regional markets seek alternatives to traditional financing.
Major Projects and Investments
In Dubai, infrastructure projects account for a significant portion of government expenditures, including roads, bridges, and renewable energy stations. The Al Maktoum Airport expansion is a key initiative aimed at enhancing quality of life and promoting sustainable mobility.
Sustainability and Economic Goals
Under its vision for net zero emissions by 2050, the UAE is launching green projects to achieve economic and environmental sustainability. This strategy is expected to drive the sukuk and bond market, attracting global investors interested in sustainability-linked financial instruments.
Future Projections
Zahabia Gupta from S&P Global Sovereign Ratings noted that the rise in issuances will be supported by public investment plans, including the Al Maktoum Airport expansion and the rainwater drainage network in Dubai. Lower interest rates will also boost lending for businesses and individuals.
On a federal level, the UAE has been issuing foreign and local currency bonds and sukuk to support capital market development and build a yield curve for non-sovereign issuers.
Doubts Revealed
UAE
UAE stands for the United Arab Emirates, a country in the Middle East known for its modern cities like Dubai and Abu Dhabi.
Mega Projects
Mega projects are very large-scale projects, often involving infrastructure, like building airports, roads, or big buildings.
Sustainability
Sustainability means using resources in a way that does not harm the environment and can be maintained for a long time.
Bonds
Bonds are like loans that people or companies give to the government or businesses, expecting to get their money back with some extra money called interest.
Sukuk
Sukuk are similar to bonds but follow Islamic finance principles, which means they do not involve interest and are structured differently.
Fitch
Fitch is a company that gives ratings to countries and companies to show how safe it is to lend them money.
S&P
S&P, or Standard & Poor's, is another company that provides financial information and ratings about how safe it is to invest in different places.
Bashar Al Natoor
Bashar Al Natoor is a person who works at Fitch and talks about financial trends and investments.
Zahabia Gupta
Zahabia Gupta is a person who works at S&P and provides insights on financial investments and projects.
Al Maktoum Airport
Al Maktoum Airport is a large airport in Dubai, UAE, which is being expanded to handle more flights and passengers.
Net zero emissions
Net zero emissions means balancing the amount of greenhouse gases put into the air with the amount taken out, aiming to stop climate change.
Capital markets
Capital markets are places where people buy and sell investments like stocks and bonds, helping businesses and governments raise money.
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