The UAE’s debt capital market (DCM) is on track to grow to $400 billion in the coming years, Fitch Ratings said.

The growth will be fueled by funding diversification, upcoming debt maturities, infrastructure financing, regulatory reforms, and the Dirham Monetary Framework.

“After surpassing $300 billion and up just over 10% from last year, the emirate’s DCM is on track to reach $400 billion,” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings.

The UAE is a key player in the global sukuk landscape, with 92% of its sukuk being investment-grade and nearly all of its sukuk issuers on stable outlooks.

“No defaults in 2024 highlight the market stability, supported by the evolving Dirham Monetary Framework and favourable funding conditions,” he added.

Sukuk made up 20.8% of dollar issuances in 2024, followed by ESG issuance at 17.2%. The dirham’s share of the DCM surged to 23% by 2024-end compared to 0.5% in 2020.

“The UAE’s consolidated debt is stable. We expect UAE banks to continue being key debt issuers and investors,” Al Natoor added.

However, challenges persist as the DCM investor base is mainly concentrated in banks.

“Dirham issuance by corporates and banks is rare. Many large corporates are starting to issue debt, but the funding culture remains bank-focused.”

Sharia complexities, including AAOIFI Standard 62, pose risks for sukuk, Al Natoor said.

(Editing by Brinda Darasha; brinda.darasha@lseg.com)