The United Arab Emirates debt capital market (DCM) is projected to experience moderate expansion through the second half of 2026 and into 2027, according to a recent report by Fitch Ratings. Growth will be primarily driven by economic diversification strategies, multi-sector funding needs, and ongoing regulatory enhancements. Fitch forecasts consolidated UAE government debt to rise to 25% of GDP in 2026, up from 22.7% in 2025, with local banks and corporate entities expected to execute opportunistic issuances. UAE institutions are set to maintain their position among the largest U.S. dollar debt and sukuk issuers across emerging markets, supported by Nasdaq Dubai’s standing as a premier global listing exchange for dollar-denominated sukuk.
Despite these positive driver factors, geopolitical conflict presents a key headwind to market performance. Broader growth momentum remains vulnerable to potential escalations in the U.S.-Iran war, fluctuating oil prices, and benchmark interest rate volatility. Yield spreads on Abu Dhabi’s 10-year U.S. dollar sovereign bonds over U.S. Treasuries have widened due to heightened geopolitical risk premiums, remaining above pre-war levels recorded earlier in the year, while secondary market liquidity for rated sukuk has tightened.
By the end of the first half of 2026, the UAE’s total outstanding DCM expanded 3% year-on-year to roughly $320 billion, with U.S. dollar-denominated paper comprising over 70% and sukuk accounting for 21%. Total U.S. dollar debt issuance reached $24 billion in H1 2026—a 40% increase compared to H2 2025—with ESG-linked debt representing 12% of the overall dollar market. Overall credit fundamentals remain solid, with over 80% of rated sukuk maintaining investment-grade status and zero default history. However, regional volatility has begun to impact outlooks: the share of sukuk issuers with a Stable outlook dropped to 81% in H1 2026, and Fitch has placed select entities—including the Emirate of Ras Al Khaimah and several corporate issuers—on Rating Watch Negative (RWN).
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