Abu Dhabi to Take Billions From ADIA for Debt, Fitch Says

Fitch expects the emirate to issue 40 billion dirhams ($11 billion) of bonds in the local market in 2016 and 60 billion dirhams in 2017. It said the deficit widened to 13.2 percent of gross domestic product last year from 7.2 percent in 2014. The agency predicted deficits of 11.6 this year and 5.3 percent of GDP in 2017.

"The 2016 budget is still under discussion but we expect further reductions in non-current expenditure," it said. “The drop in oil revenues has accelerated reform efforts at the UAE level, and these benefit Abu Dhabi as the largest contributor to the federal budget.”

Fitch rated Abu Dhabi’s risk of defaulting on local and foreign debt at ‘AA’ and gave the emirate a stable outlook. About half of Abu Dhabi’s economy comes from oil while the percentage drops to about 30 percent for all of the United Arab Emirates, a federation of seven states that also includes Dubai.

“Despite the rising challenges, Abu Dhabi’s credit-risk profile remains comfortable with no risk of a rating downgrade as the emirate has sufficient reserves and adequate fiscal flexibility to weather a low oil-price environment at least for another two years," Bantis said.

Oil Boom

Even during the oil boom, Abu Dhabi began to diversify its economy away from oil, branching out into aviation, industry and services. As oil prices dropped to below $30 this year from more than $100 in June 2014, Abu Dhabi has taken measures to reduce expenditure by deregulating fuel prices and increasing utility prices.

The slump has trickled down to non-oil parts of the economy, with local banks suffering a liquidity squeeze as a result of outflows of government deposits and state-owned companies such as Etihad Rail cutting jobs and suspending tendering process.

To contact the reporter on this story: Mahmoud Habboush in Abu Dhabi at mhabboush@bloomberg.net To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net Ross Larsen, Andrew Blackman


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