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Fri 3 Feb 2017 11:03 AM

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S&P cuts Sharjah credit ratings on growing debt burden

Acting by ratings agency comes as Sharjah gov't undertakes higher levels of borrowing primarily to finance improvements to its infrastructure

S&P cuts Sharjah credit ratings on growing debt burden

Sharjah's credit rating has been lowered by Standard & Poor's due to a rising debt burden connected to plans to finance a growing capital expenditure programme.

The ratings agency revised its long-term credit rating for the emirate to BBB+, with a stable outlook, saying the Government of Sharjah has undertaken higher levels of borrowing primarily to finance improvements to its infrastructure, assisting eligible citizens with housing programmes, and upgrading public services.

The change in rating reflects an increase in the government’s debt over recent years, pushing up interest costs relative to government revenues.

Waleed Al Sayegh, director general of Sharjah Finance Department, said: “Sharjah Finance Department is focused on ensuring strong, sustainable public finances with justifiable increases in revenues used prudently to provide high-quality public services and develop the economic infrastructure of the emirate.”

He added: “The recently published 2017 Budget saw only a 3 percent rise in planned expenditure, with 41 percent of the total now allocated to economic development through various government departments.

"The new budget will help create 1,800 new government jobs for Emiratis. This careful investment in the capital base of Sharjah, alongside the longstanding focus on education, will be the foundation for long-term economic growth and development.”

He said government gross debt remains very low by international standards at less than 17 percent of GDP while liabilities from government-related entities are "very limited".

Earlier in January, Sharjah set its 2017 budget at AED22 billion ($5.99 billion), the largest in the emirate's history.

Sheikh Mohammed bin Saud Al Qasimi, chairman of the Central Department of Finance in Sharjah, said about 30 percent of total government expenditures have been allocated to infrastructure next year.

Last year, Sharjah approved its government budget for 2016 which included a two percent rise in spending to AED20.3 billion.

The emirates is relatively well insulated from oil prices, as Sharjah’s dependency on oil revenues is less than 1 percent.

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