UAE government records budget surplus in second quarter

The UAE authorities achieved a budget surplus of Dh9.75 billion towards the end of the next quarter of 2020.

Government revenue by the finish of the next quarter exceeded Dh34.7bn, while spending stood at about Dh25bn, state news agency Wam said, citing a Financial Performance Report from the Ministry of Finance.

A surplus of Dh7.95bn was made during the quarter, following on from Dh1.8bn in the first quarter. Second quarter earnings stood at Dh19.45bn, 56 % of which was produced by the Ministry of Finance.

The UAE's federal government has a credit history of Aa2 and a stable outlook, according to ratings agency Moody's.

"The credit profile of the UAE is supported by the assumed full backing of the federal government of Abu Dhabi and its own strong balance sheet," Moody's said in its total annual credit analysis of the federal government in June.

It said the sizeable sovereign assets of the Abu Dhabi Investment Authority supported its credit history, as did the country's "superior infrastructure, high per capita income and vast hydrocarbon reserves".

Abu Dhabi's Ministry of Finance last week secured strong interest from debt market investors for a $5bn bond issue, including a two-year note coming in at just 0.83 % - the cheapest rate paid by a Gulf sovereign to borrow money on international debt markets. It also included a 50-year note, which may be the longest-dated bond issued by a Gulf sovereign yet. The problem was 4.8-times oversubscribed.

Bonds issued by Gulf sovereigns are popular from investors, with yields on GCC sovereign debt continuing to fall even while they stabilise elsewhere, a note by economists from National Bank of Kuwait said on Monday.

"GCC sovereign bond yields have trended downwards since April as investors priced in a less risky environment," the note said, adding that credit default swap rates - a kind of insurance on bond defaults -have also eased.

"The strong investor demand given the exceptionally low yields of global alternatives, in addition has helped push down GCC yields," it said.

Bonds and sukuk issued by GCC entities stood at $58bn towards the end of June, compared with $62bn in the first half of this past year, according to NBK.