Sharjah, in its first sovereign credit ratings, has been assigned A-class economy with stable outlook by two leading agencies that will help strengthen the emirate’s investment profile and reduce the cost for future debt sales according to an article in Khaleej Times.
Moody’s has assigned Sharjah a long-term rating of A3, with a stable outlook, while Standard & Poor’s assigned a long-term rating of A, also with a stable outlook. These are strong credit scores and in both cases, Sharjah is rated as a sovereign government entity. This credit rating exercise is the first that the Government of Sharjah has undertaken.
S&P said: “Its rating for Sharjah reflected the emirate’s comparatively wealthy and diverse economy, limited fiscal risks and low government debt, and the likelihood of support from the UAE if the need arises.
The government has recorded only small fiscal deficits of around 1-2 per cent of GDP on average since 2008. Moreover, government debt is very low at around six per cent of GDP as of 2012 and Moody’s expects it to remain below 10 per cent in 2014.
Speaking at a news conference, Sharjah’s Finance Department director general Waleed Al Sayegh said the credit rating would open the door to new investors from abroad and boost the confidence of local business. Combined with the benefit of potentially lower borrowing costs, the credit rating will help the emirate to further invest in infrastructure, Al Sayegh added.
The ratings were announced on Wednesday in the presence of Chairman of Sharjah Finance Department and Member of the Sharjah Executive Council Shaikh Mohammed bin Saud Al Qasimi by the Sharjah Finance Department, after the two agencies conducted a study on the economy of the emirate as a sovereign entity.
“These credit ratings firmly establish Sharjah within the top tier of sovereigns globally, affirming our position as a leading investment destination,” Shaikh Mohammed said.
The government officials said the Sharjah is not planning a conventional or Islamic bond issuance for now but said the credit rating ensures that is a realistic alternative to secure funds in the future.
According to the Department, the nominal GDP growth of Sharjah has been strong and steady, averaging 11 per cent from 2001 to 2012, with only a limited and short-lived impact from the global financial crisis.
In a presentation it elaborated on the various factors contributing to this growth. Economic growth has been spread across a wide range of sectors, and in the financial year 2012 no individual sector represented more than 20 per cent of GDP. As such, Sharjah has one of the most diversified economies in the GCC region, it noted.
Sharjah has taken advantage of its natural geographic advantages through world-class infrastructure and its membership of the UAE provides political stability, a business-friendly environment and financial strength.
The emirate is unique in holding ports on both the east and west coasts of the UAE, in addition to its international airport, which serves over 100 cargo and passenger destinations within a 4-hour radius. These logistics hubs are well connected by the strategic road network, with enhancements to north-south routes and a new east-west routes in progress, and are fully integrated with the Airport Free Zone and Hamriyah Free Zone.
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