Sharjah deep dive: Debut sustainable bond pending following fiscal plan
• Sharjah is issuing its debut sustainable bond next week and needs about $4.7bn in financing this year.
• This follows the release of its first medium term plan, which prompted S&P to stabilize the rating and, along with Moody’s, to materially reduce projected debt levels.
• The fiscal plan aims for a primary balance by 2027 and to stabilize debt around 55% of GDP.
• This follows a decade of rising expenditure, on capital projects and social services, and relatively stagnant revenue that drove debt up from 5% of GDP in 2013 to 46% in 2022.
• This led to four notches of downgrades from both agencies and the loss of its IG-status from Moody’s.
• Sharjah’s fiscal accounts are complex and changing, particularly as regards flows to and from GREs. We have unpacked this in detail to help understand underlying trends in core revenue and expenditure.
• Encouragingly, the deficit eased to 6% of GDP in 2022 from a peak of 8% in 2021 on significant revenue growth and relatively flat expenditure.
• The MTFO revenue projections look reasonable, with corporate income tax being the major driver, along with hydrocarbon production from the new Mahani field.
• The plan to limit expenditure growth to about half the rate of nominal GDP growth will be challenging, and evidence will be needed to show this is actually being achieved.
• Although Sharjah is fiercely independent, it is likely to receive emergency support from the UAE if ever needed.
• Its underlying economy relies heavily on the rest of the UAE, particularly as a large part of the Sharjah resident population commutes to Dubai for work.
Now read on...
Register to sample a report