Moody's sees 'credit-positive' 2015 Sharjah budget

International credit rating agency Moody’s Investors Services has reaffirmed Sharjah’s ‘A3’ long-term credit rating with a stable outlook.

Moody’s attributed strong ratings for the emirate due to its strong government finances with a very strong fiscal and government debt position, diversified economic structure with a competitive manufacturing sector and the government's focus on education which is supportive its economic growth potential.

The Government of Sharjah’s first public debt issuance, a $750 million 10-year Sukuk which reduced the average borrowing cost of the government and was more than ten times oversubscribed by investors.

Analysing the Sharjah budget for 2015, Moody’s noted that “2014 figures show a lower-than-budgeted cash deficit for the year”, while the 2015 budget envisages “a stabilisation in the deficit, a credit-positive trend”.

Moody’s analysis states that “the assumptions underlying the 2015 revenue projections appear conservative”, consistent with the Government of Sharjah’s longstanding prudent approach to management of the public finances.

Addressing the issue of recent falls in oil prices, the agency emphasises the diversity of Sharjah’s revenue base, noting that “Sharjah has a relatively small oil and gas sector which contributes 13 per cent to GDP and 14 per cent to total revenue, much less than that of regional peers”, and that “the government plans increased land sales in 2015 compared to the 2014 outturn and to implement other revenue-enhancing measures.”

Sheikh Mohamed Bin Saud Al Qasimi, Chairman of Sharjah Finance Department, said: “The success of our recent public Sukuk issuance demonstrates a high level of confidence among investors in Sharjah’s economy and in the government’s prudent management of the public finances.”

Tom Koczwara, Director of Sharjah’s Debt Management Office, said: “Our credit ratings are an important element of our strategy to manage the cost and risk associated with government borrowing, and we are particularly pleased to note the positive direction of travel highlighted in Moody’s note on the 2015 budget.”

Sharjah has been rated “A” with stable outlook from Standard & Poor's. S&P’s reaffirmed Sharjah’s “A” rating in November 2014.

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