UAE: Quick thoughts on Sharjah's paused sukuk issuance

GULF COUNTRIES - In Brief 28 Mar 2022 by Justin Alexander
Sharjah began marketing a $750m sukuk last week, its first since July 2021. We had initially thought this had priced on Friday, but this was incorrect (thanks for the correction from a client). The issuance seems to have paused because of volatile rates (GC) but may price this week. Here are a few reflections based on limited information:To our knowledge, no new fiscal data has been disclosed. We haven't seen a prospectus and the roadshow presentation only gave the 2021 and 2022 budgets and showed S&P's estimate of 2021 debt (40% of GDP) and the maturity profile, not official figures. Official GRE debt and asset figures were only given for end-2020, as previously shown in the July 2021 prospectus.Given Sharjah's large structural deficit in recent years (-6.9% of GDP in 2020) and in its 2021 and 2022 budgets (-6.7% and -7.3% respectively), more disclosure is really needed. This deficit is particularly significant because of Sharjah's limited ability to raise revenue at the sub-national level.A misleading graph shows Sharjah's expenditure as a share of GDP (17%) being considerably lower than its rating peers, but this is not comparable because it does not consolidate the expenditure on behalf of Sharjah by the federal government and Abu Dhabi.A positive data point was hotel occupancy in Q4, up to 76% from 56% in Q3 and even ahead of the 75% in Q4 2019. Sharjah is certainly benefiting from the rebound in Dubai and the Q1 2022 figure is also likely to be strong.We have updated the GCC Databank to include Sharjah's fiscal outturns for 2017-20 and budgets for 2021-22. Sharjah presents its fiscal data in unusual ways and we have more work to do on understanding how it works a...

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