Moody’s: Abu Dhabi credit profile reflects strength of government's balance sheet

profits 1953616 640Total government debt in Abu Dhabi is equivalent to five per cent of the total value of the Abu Dhabi Investment Authority's (ADIA) gross assets under management, according to Moody’s report on credit developments from coronavirus

The report has further added that in response to the weaker growth environment which had taken hold even prior to the coronavirus outbreak, the government’s focus has shifted away from fiscal reforms and towards economic policies to stimulate the economy and support the development of the non-oil sector.

This includes measures implemented in 2018 such as government service fee freezes and cuts and an US$13.6bn stimulus package over 2019-21. Out of the US$6.26bn disbursed in 2019, 35 per cent was directed into infrastructure, 46 per cent into housing and land, four per cent into tech companies and two per cent into a venture fund.

 A very high per capita income, vast hydrocarbon reserves and superior infrastructure support creditworthiness. In addition, domestic politics are stable and the UAE has good relations with the international community.

Abu Dhabi's main credit challenges lie in a lack of institutional data transparency, particularly the absence of public figures on prospective budgets and on the composition of offshore assets managed by ADIA. Regional geopolitical tensions present event risks, and the emirate's dependence on hydrocarbons is also a significant vulnerability. That said, the investment returns from ADIA provide an additional source of stable revenue for Abu Dhabi

“The stable outlook indicates that the rating is supported by medium-term upside potential from continuing diversification efforts, but constrained by lingering government-related entity contingent liabilities and geopolitical tensions. The coronavirus outbreak and the oil supply glut will lower oil revenues in the short term, but unless oil prices depart significantly and durably from our medium-term range, the credit implications of such changes in prices will be limited,” according to Moody’s.

 

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