Fitch Ratings reports that the debt market in the UAE has grown by 13.1% year-on-year.

The increase in the country's debt capital markets highlights the development of its financial landscape and underscores its strategic position within the global Islamic finance sector.

According to Fitch Ratings, the UAE's debt capital markets witnessed significant growth by the end of Q3 2024, increasing by a remarkable 13.1% year-on-year to reach $294.4 billion.

This expansion in the UAE’s debt capital markets, with sukuk representing 20% of the total, illustrates the country's developing financial landscape and its vital role in the global Islamic finance sector.

“The UAE is a key player in the global sukuk market, possessing a 6.6% share of the total outstanding sukuk globally. This positions the UAE fourth worldwide across all currencies, following Malaysia, Saudi Arabia, and Indonesia,” stated Bashar Al Natoor, managing director and global head of Islamic Finance at Fitch Ratings, in a report to Emirates News Agency.

In emerging markets (excluding China), the UAE ranks as a significant issuer of US dollar debt, coming in third behind Saudi Arabia and Brazil, with an 8.9% share in the first half of 2024. Furthermore, it was the second-largest issuer of ESG bonds and sukuk in emerging markets (outside of China) after Brazil during the first nine months of the year.

“Regionally, the UAE holds the second-largest share of the total GCC outstanding sukuk at 16.2%, trailing behind Saudi Arabia's 71% share,” added Al Natoor.

Following the government’s implementation of the Dirham Monetary Framework, the dirham's share in the outstanding debt capital markets rose to 21.1% in H1 2024, up from just 0.5% at the end of 2020.

The government is also actively supporting sustainability initiatives. In April 2024, the securities regulator extended the fee exemption for the listing of ESG bonds and sukuk, which may further boost ESG issuance.

“The UAE’s debt capital markets are set for continued growth, with forecasts suggesting a potential rise beyond $300 billion by the end of 2024. This expansion is driven by the UAE’s strategic emphasis on enhancing its debt capital markets, which continue to attract both regional and international investors,” Al Natoor noted.

Additionally, Islamic banks play a crucial role in the UAE’s financial landscape, accounting for 29% of total sector financing at the close of H1 2024.

Shariah-compliant banks saw a growth rate of 5.7% in the first half of 2024, slightly surpassing that of conventional banks. Fitch anticipates that Islamic banks will continue to outperform over the medium term.