S&P has affirmed its ‘BBB+/A-2’ long- and short-term foreign and local currency sovereign credit ratings on Sharjah. The outlook is stable.
The ratings are supported by Sharjah’s social and political stability, continued economic growth and the advantages that Sharjah derives from its membership of the UAE, including low external risks.
The ratings are constrained by the agency’s assessment that the emirate’s political institutions are at a nascent stage of development when compared to non-regional peers in the same rating category. Limited monetary flexibility and the underdeveloped local currency domestic bond market also weigh on the ratings.
From 2015, the government relaxed its fiscal stance by postponing various revenue-raising measures and maintaining expenditures to help offset slowing economic activity. As a result, Sharjah experienced a material increase in government debt, by nearly 10 percentage points of GDP between 2013 and 2016. Associated interest costs have also increased in recent years and we project the government’s interest payments, as a proportion of revenue, to average 6.6 per cent in 2017-2020.