Abu Dhabi is well-positioned to repay debt

20 January 2014

Moody’s rates emirate’s fiscal strength as “very high”

Abu Dhabi is well-positioned to repay its forthcoming debt obligations due to its strong government finances, according to a new report from ratings agency Moody’s.

The agency rates the emirate’s fiscal strength as “very high”, which reflects “the sound capacity of the government to mobilise resources to repay its debt,” says the agency.

Abu Dhabi’s high score is shared by other sovereigns such as Singapore, Hong Kong and Switzerland.

The emirate has low central government debt of 3 per cent of its 2012 GDP.

However, debt accumulated by the emirate’s government-related entities (GRIs) amounts to 35 per cent of GDP, which makes it one of the highest indebted public sectors globally as a share of GDP.

Total government and GRI debt falling due in 2014 amounts to 8 per cent of GDP, which Moody’s sees as a “relatively moderate burden” compared to the debt obligations due for other investment grade sovereigns.

Abu Dhabi National Energy Company (Taqa) and International Petroleum Investment Company (Ipic) represent over half Abu Dhabi’s GRI debt.

Other major government entities include Mubadala and Tourism Development and Investment Company (TDIC), entities that Moody’s says will be supported by the government if needed.

The report also finds that the combined value of debt owed by Abu Dhabi’s GRIs is more than that owed by GRIs in neighbouring Dubai.

Yet, Moody’s says this debt burden is likely to be manageable due to the emirate’s “very strong” net financial asset position.

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