Sharjah says no immediate plan to issue sukuk

Thursday, Aug 03, 2017

Dubai: Sharjah does not have an immediate plan for a sukuk, a top official at the debt management office told Gulf News, contrary to media reports.

Reports, quoting sources, had earlier suggested that Sharjah had hired HSBC for a US dollar sukuk programme, and the first issuance could happen in the fourth quarter of 2017.

But, Tom Koczwara, Director, Debt Management Office, Finance Department at Government of Sharjah reiterated that the situation has not changed since the last discussion with Gulf News in early May.

“There is currently no immediate plan for a further sukuk issuance,” Koczwara said through email. The emirate had $500 million (Dh1.84 billion) sukuk issue in January last year.

Financing options:

“The Debt Management Office reviews all financing options on an ongoing basis, assessing market conditions and the government’s financing requirements, and we will make appropriate recommendations on the different options to the relevant government authorities,” Koczwara said.

S&P expects the Emirate’s fiscal deficit to narrow to 1.9 per cent of GDP in 2017 compared to closer to 3 per cent of GDP in 2016.

The agency expects the government’s consolidated fiscal revenue to increase to 9.6 per cent of GDP, or Dh8.8 billion, from 8.4 per cent of GDP in 2016, and 10 per cent of GDP on average between 2018 to 2020.  “The increase in fiscal revenues in the coming years reflects the consolidation of Sharjah’s municipalities into the budget in 2017. We also expect increased transfer payments from Sharjah’s government-related entities and land sales to contribute to revenue growth,” S&P said.

“We anticipate that the proceeds of the planned value-added tax, to be implemented in 2018, will be shared between the UAE Federal Government and individual Emirates, which

should also increase Sharjah’s government revenue over time,” the ratings agency added.

S&P has a ‘BBB+/A-2’ long and short-term foreign and local currency sovereign credit rating on the emirate with a stable outlook.

Koczwara expressed the view that Saudi Arabia’s recent local currency sukuk offering came in at the right time.

“The recent Saudi local currency issuance was seen as a very successful transaction, and in my view they tapped into the right part of the market at the right time,” Koczwara said. “I believe it is good for our region to see government authorities executing well-planned transactions so smoothly,” he added.

Saudi Arabia received bids of 51 billion riyals for a 17-billion-riyal sukuk, which the ministry of finance termed a testament to the strength and resilience of the Saudi economy.

In all, Koczwara said he expected financial requirements to determine issuances in the second half of the year. “I believe financing requirements and market sentiment will be bigger drivers of public sector participation in the bonds and sukuk market during the second half of 2017, rather than what the Fed does,” Koczwara said.

By Siddesh Suresh Mayenkar Senior Reporter