Moody's reaffirms Sharjah's A3 credit rating and highlights “credit-positive” 2015 budget

Moody’s Investors Services, a leading international credit rating agency, has confirmed that the Emirate of Sharjah will continue to enjoy a strong “A3” long-term credit rating with a stable outlook.
The rating agency’s Credit Opinion, published on 23 January 2015, highlights:

• “the emirate’s strong government finances”, with a “very strong fiscal and government debt position”;
• Sharjah’s “diversified economic structure with a competitive manufacturing sector” and “the government’s focus on education [which] is supportive for the emirate’s economic growth potential”;
• the Government of Sharjah’s first public debt issuance, a US$ 750 million, 10-year sukuk which “reduced the average borrowing cost of the government” and was more than ten times oversubscribed by investors.

In a separate report, published on 5 February 2015 under the heading Sharjah’s 2015 Budget Shows Credit-Positive Fiscal Trend, Moody’s assesses the emirate’s 2015 budget, which was announced on 27 January, as well as preliminary data for the 2014 budget outturn.

The analysis notes that "the 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% to GDP and 14% 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.”

Commenting on Moody’s reports, Sheikh Mohamed Bin Saud Al Qasimi, Chairman of Sharjah Finance Department, stated: “We thank Moody’s for their reports and for their recognition of our commitment to develop the local economy in a sustainable manner that delivers social benefits to local citizens and residents. 

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, stated:
“Moody’s rating process is a thorough and rigorous examination of a government’s creditworthiness, and we are proud to maintain a strong rating with them.  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.”

The Emirate of Sharjah has since January 2014 held a long-term credit rating of A3 with stable outlook from Moody’s Investor Services, and a rating of A with stable outlook from Standard & Poor’s.  Standard & Poor’s reaffirmed Sharjah’s A rating in November 2014.