Dubai: Getting hit by the COVID-19 outbreak does not mean Abu Dhabi will have to alter its economic and growth priorities, according to a top official at the emirate’s Department of Finance.
What it has done is raise Abu Dhabi’s “commitment to future-proofing our revenue streams by prioritizing diversification while increasing returns on public investments is the right approach,” said Jassim Mohammed Buatabh Al Zaabi, Chairman.
“Our fundamentals really speak for themselves: We have a net asset position exceeding 200 per cent of GDP - despite the oil price decrease. At the end of 2019, Abu Dhabi’s debt-to-GDP ratio stood at 12.1 per cent, which is among the lowest in the world.
“This puts us in a privileged position to take advantage of windows of market opportunity.”
More funds to make that happen
Abu Dhabi has just raised $3 billion via an international bond issue and which followed another of $7 billion, launched in April and oversubscribed 6.3 times.
“The smaller portion of $3 billion was tactically held back so that we could leverage a more favorable market opportunity,” said Al Zaabi.
The $3 billion “tap issue” comes with the “lowest yields ever in in the GCC” on each of the three tranches, split into a $1 billion 5-year tranche, another for $1 billion and a 10-year tranche, and $1 billion 30-year tranche.(Tap issue relates to bonds of different timelines, with volumes sold on a particular day dependent on market conditions.)
“We achieved unprecedented pricing inside Abu Dhabi’s yield curve, which further underscores that this was the opportune moment for the tap,” the finance chief said.
“The proceeds will allow us to accelerate Abu Dhabi’s non-hydrocarbon sector growth. Through proactive policymaking, we have been laying solid foundations for a resilient economy in line with the Abu Dhabi Economic Vision 2030.
“Our mandate is to safeguard the wealth of Abu Dhabi for future generations. In light of this, our contribution is to develop and execute a prudent fiscal policy and proactive debt management strategy for the emirate, both of which have enabled us to build up a fiscal buffer that is now carrying us through the headwinds.”
Wide investor base
The 30-year $1 billion tranche picked up a strong vein of international investor interest, and they made up 98 per cent of the final geographical allocation. Abu Dhabi remains the only AA rated sovereign in the region.
“Despite pandemic-induced market turbulence, we are in a unique position of strength due to our resilient balance-sheet, which is underpinned by modest levels of debt and a solid asset base, including two of the world’s largest sovereign wealth funds,” said Al Zaabi.
Saudi Arabia was another to tap the international bond market recently, raising $7 billion.
Abu Dhabi has the capacity to strategically add debt when an opportunity to capitalize on favorable market conditions presents itself
* Then in May came the $3 billion bond tap, which was oversubscribed 7 times. This "served as a potent demonstration of the emirate’s proactive debt management strategy, which is focused on capital structure optimization," Abu Dhabi Department of Finance said in a statement on Wednesday.