The Government of Sharjah has undertaken higher levels of borrowing primarily to finance a growing capital expenditure programme focused on enhancing the Emirate’s infrastructure (particularly roads), assisting eligible citizens with housing programmes, and upgrading the public realm in order to deliver better public services.
Standard & Poor’s has released a Rating Update on 27 January 2017, revising their long-term credit rating for the emirate of Sharjah to BBB+, with a stable outlook. The change in rating reflects an increase in the government of Sharjah’s debt incurred in recent years, pushing up interest costs relative to government revenues.
Commenting on the report from Standard & Poor’s, Waleed Al Sayegh, Director General of Sharjah Finance Department stated: “Sharjah Finance Department is focused on ensuring strong, sustainable public finances with justifiable increases in revenues used prudently to provide high-quality public services and develop the economic infrastructure of the emirate.”
He added: “The recently published 2017 Budget saw only a 3% rise in planned expenditure, with 41% of the total now allocated to economic development through various government departments. The new budget will help create 1,800 new government jobs for Emiratis. This careful investment in the capital base of Sharjah, alongside the longstanding focus on education, will be the foundation for long-term economic growth and development.”
The strong investment-grade rating assigned to Sharjah underscores the emirate’s underlying financial robustness, with strong growth in revenues, low cost of debt and a flexible expenditure profile. Government gross debt remains very low by international standards at less than 17% of GDP, with offsetting liquid financial assets worth 3.4% of GDP. The government’s contingent liabilities from government-related entities are very limited, compared with regional and international peers, with GRE gross debt at less than 12% of GDP. This highlights the Government’s strategy to focus efforts on providing high-quality infrastructure and public services, enabling economic growth to be led by the private sector.
Sharjah now enjoys one of the most diversified economies in the region, with a strong focus on manufacturing, industry and trade. It is relatively well insulated from oil prices, as Sharjah’s dependency on oil revenues is less than 1%. Sharjah has achieved positive economic growth throughout the recent GCC economic downturn, with all non-hydrocarbon sectors reporting strong performances. Building on its position as “The Cultural Emirate”, Sharjah aims to attract tourists and investors looking for a safe, pleasant and carefully managed environment in which to stay, live and do business.