The ratings are supported by the benefits of Ras Al Khaimah’s (RAK) membership of the UAE, a low and declining government debt burden and high GDP per capita.
Tuesday 20, August 2019 BY KUDAKWASHE MUZORIWA
Fitch Ratings has affirmed its ‘A’ long-term foreign-currency issuer default rating (IDR) of the Emirate of Ras Al Khaimah with a stable outlook.
According to Fitch, RAK shares the UAE monetary and exchange rate system of a credible US dollar peg and absence of exchange controls as well as the Federal Government’s foreign exchange reserves.
Most public services and infrastructure are provided directly by the government, making RAK's spending more flexible than peers and relieving the Emirate of some of the spending needs of a typical sovereign, said Fitch.
The rating agency expects the debt of the government and its state-owned enterprises to fall to below 20 per cent of GDP in 2019 from 33 per cent in 2015, adding that it will fall further to close to 17 per cent of GDP in 2020 as the government uses VAT receipts for the early repayment of AED 678 million of private placements.
The close integration within the UAE allows the Emirate to focus on its development strategy and build a relatively diversified economy dominated by manufacturing and services.
Additionally, the government's fiscal surplus increased to 2.6 per cent of GDP in 2018, from 1.4 per cent in 2017, sustained by the recovery of mining and quarrying activities as well as receipts from the sale of the government's 41 per cent stake in Union Cement Company.
Similarly, Fitch forecasts a fiscal surplus of 2.7 per cent of GDP in 2019, largely underpinned by RAK's receipt of close to two years' worth of VAT, amounting to over two per cent of GDP.
The authorities are continuing to improve data collection, budgeting and financial planning and control, in a bid to use fiscal resources more efficiently. The government expects to introduce a new policy governing liquidity management.