Global credit rating agency Moody’s Investors Service has affirmed the long-term issuer rating for the Government of Sharjah at A3 and maintained the outlook at stable. Moody’s has affirmed the same high rating with a stable outlook for the emirate since its first rating report in 2014. Moody’s also affirmed its A3 ratings on Sharjah’s two senior unsecured sovereign Islamic bonds, or sukuks, which were issued by the government in 2014 and 2016.
Moody’s cited three key factors for re-affirming Sharjah’s A3 rating and maintaining the stable outlook” i) the agency’s expectation that the introduction of new revenue-raising measures, including VAT, will reduce the fiscal deficit and stabilise government debt levels in the coming years; ii) lower risks posed by contingent liabilities to the government’s balance sheet, including improved performance of state utility company Sharjah Electricity and Water Authority (SEWA), which is now a net contributor to the budget; and iii) resilient economic strength, underpinned by a relatively diversified industrial base and supported by government initiatives encouraging foreign direct investment (FDI).
Moody’s noted that Sharjah’s diversified economy, with no single sector comprising more than a fifth of GDP, has helped cushion the local economy from oil price volatility. Meanwhile, the emirate’s position as a regional manufacturing hub, has helped ensure continued investment into economy, supported by government policies aimed at fostering a private-sector growth. According to the agency, manufacturing contributed 17 percent of GDP in 2016.
Moody’s expects Sharjah to achieve a growth of 2.7 percent in real GDP, both in 2018 and 2019, benefiting from more favorable economic conditions at the country level and from global trade. The emirate’s stable outlook reflects the credit rating agency’s view that upward and downward rating pressures are broadly balanced, and also that government fiscal measures will lead to a stabilisation of the debt burden near current levels.
Sharjah government has consistently garnered recognition for its solid fiscal management from global rating agencies and analysts, as it has developed its financial systems to keep pace with a dynamic economic and financial environment. The Sharjah Central Finance Department (SFD) far-reaching strategy for 2016-2018, includes a set of measures to ensure effective management of public debt and the ability to better manage Sharjah’s credit rating. The SFD’s strategy also includes goals toward greater transparency, integrity, innovation, departmental empowerment and social responsibility.
Sharjah secured its first global credit ratings in 2014, in advance the emirate’s first 10 year sovereign sukuk. The government’s sukuks have helped to highlight the solid fundamentals of Sharjah’s economy and strong fiscal policy to a global economic audience.
Source: Moody’s Investors Services; Government of Sharjah