S&P says transparency would be key to new credit rating for Abu Dhabi

A top credit ratings agency said it would consider raising Abu Dhabi’s rating if it increased transparency about its financial assets.

A report from Standard & Poor’s said: “Pronounced improvements in data transparency, including on fiscal assets and external data” were needed before it could consider improving its assessment of the emirate’s finances.

Holdings of the UAE’s sovereign wealth funds are equal to about 250 per cent of GDP, the SWF Institute estimates. The UAE Central Bank holds additional foreign exchange reserves equivalent to about 20 per cent of GDP.

Given the large range of estimates for the assets of the Abu Dhabi Investment Authority, the exact ratio of reserves and foreign holdings to GDP is not known.

If reserves fell below 100 per cent of GDP, “downward pressure on [Abu Dhabi’s credit] rating would mount”, the report said, but added that this was unlikely to occur within the next two years.

In its biannual report, S&P said that low oil prices were a significant threat to the credit ratings of Bahrain and Oman.

The Arabian Gulf’s remaining oil exporters have been insulated by their reserves, while oil-importing nations in North Africa are set to benefit from cheaper oil prices, which could cut inflation and boost the competitiveness of non-oil exports.

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