With a stable outlook, Moody’s Investors Service affirmed the UAE government’s long-term bond ratings in both local and foreign currencies at Aa2.
Respectively Aa2 (p) and Aa2 at (MTN), the agency added in its report that it has affirmed the rating of the unsecured foreign currency debt and the medium-term note program.
Moody’s stated that this rating reflects its expectations that the burden of federal government debt will remain very low, supported by its commitment to a balanced budget policy and its limited expenditure needs due to fiscal decentralization.
It indicated that the stable outlook reflects a balanced risk at the Aa2 level, the federal government’s efforts to expand non-hydrocarbon revenue sources, develop non-hydrocarbon sectors, and enhance the country’s attractiveness for foreign investments and talents, which strengthens the overall credit position.
It confirmed that the credit rating ceilings for the United Arab Emirates in both local and foreign currencies remained unchanged at the Aaa level. This reflects the effectiveness of the state’s institutions, their future aspirations, and the strength of its position in external accounts.
She pointed out that despite the UAE being exposed to long-term risks related to carbon transition and ongoing regional geopolitical tensions, the implementation of effective policies mitigates these challenges, including the policy of promoting economic diversification.
She explained that the hydrocarbon sector in the United Arab Emirates will be able to produce and generate income even with the significant decline in global demand for hydrocarbons and their prices, thanks to its massive hydrocarbon reserves, its large spare production capacity of crude oil, and its extremely low production costs.
It reported that the state’s strong non-oil growth has benefited from structural reforms over the past few years, enhancing the UAE’s attractiveness as a major destination in the region for foreign investment, which has bolstered its position as a key hub in the Middle East for transport and logistics, as well as business and financial services.
In addition to that, there were significant public sector investments in infrastructure and a range of targeted economic sectors, especially in Abu Dhabi and Dubai.
The agency expected continued strong support from the Abu Dhabi government, which plays a pivotal role in the state, noting its expectations that the state’s credit position will continue to benefit from Abu Dhabi’s very strong balance sheet, which supports the state’s ability to absorb shocks.
