Dubai: S&P Global Ratings has lowered it rating on the emirate of Sharjah to ‘BBB+/A-2’, citing an increased debt burden.
The agency said Sharjah’s debt as a percentage of GDP had rapidly increased since 2014 due to persistent fiscal deficits and increased capital spending.
“The downgrade reflects an accumulation of government debt above our expectations for 2016 and our revised assumption of elevated fiscal expenditure over 2017-2020, leading to a slower fiscal consolidation path. We now expect interest expenditures to stay above 5 [per cent] of revenues over this period, despite the likely introduction of revenue-raising measures,” the agency said in a statement. “Although we project the emirate’s economy will gradually recover in 2017-2020, we think fiscal consolidation will be slower than we initially anticipated.”
S&P said it expects the government deficit for 2014-2017 to average close to 3 per cent of GDP, in comparison with 1 per cent of GDP between 2010 and 2013.
“Government gross debt has increased to an average of 13.4 per cent of GDP over the past three years, and we anticipate that it will continue to increase, reaching an average of 18.9 per cent of GDP during 2017-2020,” the statement said. “Similarly, the emirate’s net debt has increased rapidly since 2014, with an average of 9.4 per cent of GDP during 2014-2016. We now project that it will be about 15.9 per cent of GDP on average during 2017-2020.”
S&P said Sharjah’s gross and net debt levels as a percentage of GDP are moderate.
