UAE mega projects boost bonds, sukuk issuances

The UAE is witnessing rapid growth in its mega projects, spanning vital sectors such as infrastructure, renewable energy, and real estate development, in line with a strategic vision that places sustainability at the core of its economic policies.

These large-scale initiatives and the country’s focus on sustainable projects that support climate plans are key drivers of sukuk and bond issuances in the coming years.

Global credit rating agencies Standard & Poor’s and Fitch have projected increased reliance on issuances in the future, driven by efforts to diversify funding sources and promote sustainable investments.

Bashar Al Natoor, Managing Director and the Global Head of Fitch Ratings’ Islamic Finance Group, noted that while the majority of financing for mega projects still relies on traditional methods, these initiatives have contributed to the growth of the issuance market by creating demand for innovative and sustainable funding sources over recent years.

He affirmed that sukuk and bonds have partially financed some past projects.

Speaking to the Emirates News Agency (WAM), Al Natoor predicted that reliance on bonds and sukuk to finance projects will grow in the coming years, as public and private sector institutions in the UAE and other regional markets seek to develop alternatives to traditional financing tools.

He pointed out that several projects - both private and government-led - are set to be developed in the coming years, including real estate, infrastructure, and renewable energy projects.

In Dubai, for instance, the infrastructure sector accounted for 46 per cent of total government expenditures in the 2025-2027 budget, covering projects such as roads, tunnels, bridges, transportation systems, sewage plants, parks, renewable energy stations, and the rainwater drainage network.

Additionally, the Al Maktoum Airport expansion project, announced last year, is among the key initiatives aimed at enhancing quality of life and promoting smart and sustainable mobility in the emirate. Al Natoor further explained that under its strategic vision for net zero emissions by 2050, the UAE is launching a series of green projects to achieve economic and environmental sustainability, which will be a major driver for the sukuk and bond market in this sector.

He emphasised that this strategy will lead to increased issuances of sukuk and bonds across various institutions and sectors to finance sustainable projects aligned with the UAE’s environmental goals, a trend already observed in previous years.

Al Natoor also highlighted that the UAE’s green projects represent a strategic direction that attracts global investors interested in sustainability-linked financial instruments.

Meanwhile, Zahabia Gupta, Director and Lead Analyst for Middle East and Central Asia at S&P Global Sovereign Ratings, stated that the continued rise in issuances in the UAE over the next two to three years will partly be attributed to robust public investment plans. These include the $35 billion Al Maktoum Airport expansion and the $8.2 billion rainwater drainage network in Dubai, which is set for phased completion by 2033.

She further explained that lower interest rates will contribute to increased lending for businesses and individuals, including mortgage financing.

On the federal level, Gupta noted that the UAE government began issuing foreign currency bonds in 2021, followed by local currency treasury bonds in May 2022, and local currency sukuk in April 2023. These issuances aim to support the development of capital markets in the UAE and help build a yield curve for non-sovereign issuers.

Separately, Nasdaq Dubai welcomed Middle East and North Africa’s (Mena’s) first corporate Blue Bond listing of $100 million by DP World, a leading provider of global end-to-end supply chain solutions. Issued under DP World’s $10 billion Global Medium-Term Note Programme, the bond carries a 5.250 per cent coupon rate and matures in 2029. The issuance achieved a spread of 99.6 basis points (bps) above US Treasuries — the tightest spread ever achieved by DP World in both the bond and Sukuk markets.

It highlights the region’s growing commitment to sustainable finance, with proceeds funding critical projects such as marine transportation, port infrastructure, and water-positive initiatives.

This landmark issuance contributes directly to the United Nations Sustainable Development Goals (SDG) 6 (Clean Water and Sanitation) and SDG 14 (Life Below Water), addressing the significant funding gap for sustainable marine and water-related initiatives, and solidifying Nasdaq Dubai’s position as a leading platform for innovative ESG-linked financial instruments.

WAM