Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The value of sukuk outstanding in the UAE reached about $68 billion at the end of the first half of 2026, up 0.1% from the same period last year, according to Fitch Ratings.
UAE sukuk issuance totalled $4.5 billion during the six-month period, compared with $14.3 billion in the first half of 2025, Bashar Al Natoor, Managing Director and Global Head of Islamic Finance at Fitch Ratings, told Aletihad. The 68% decline in issuance came amid the special conditions prevailing in the region.
Sukuk accounted for more than 21% of the UAE’s outstanding debt capital market at the end of the first half, with conventional bonds accounting for the remainder, Al Natoor said.
Most UAE sukuk outstanding were denominated in US dollars, which accounted for about 87% of the total. UAE dirham-denominated sukuk represented about 12%, while other currencies accounted for less than 1%.
Fitch rates more than $30 billion of sukuk issued from the UAE, about 82% of which were investment grade at the end of the first half of 2026.
Asked about the UAE’s retail sukuk programme, Al Natoor said Fitch did not rate the programme. However, it is included in the agency’s monitoring of the UAE’s broader debt capital market and sukuk activities and dynamics.
Giving Fitch’s outlook for the domestic market, Al Natoor said the UAE was expected to remain among the world’s largest sukuk markets during the second half of 2026 and in 2027.
“Consolidated UAE government debt is forecast to rise to 25% of GDP in 2026 (2025: 22.7%), with sukuk a key funding source. Banks and corporates would remain opportunistic issuers,” Al Natoor said.
“Market dynamics are likely to become clearer once the regional geopolitical tensions ease,” he added.
The slowdown in the UAE occurred against the backdrop of weaker issuance across the principal global sukuk markets. Sukuk worth $125 billion were issued in the GCC, Malaysia, Indonesia, Türkiye and Pakistan during the first half of 2026, down 36% from the second half of 2025. Conventional bond issuance in those markets declined by 0.8% over the same period, including issuance by multilateral institutions, Fitch said in its Global Sukuk Market Monitor.
Issuance weakened further during the second quarter amid market volatility and rising yields. Sukuk issuance in all currencies fell 31% quarter on quarter to $53 billion, while dollar-denominated sukuk issuance dropped 45%. Fitch said many issuers turned to private placements and syndicated funding.
Despite the issuance slowdown, the value of sukuk outstanding globally reached $1.1 trillion at the end of the first half, an increase of 11% from a year earlier.
Malaysia represented 33% of global sukuk outstanding by country of risk, followed by Saudi Arabia at 32%, Indonesia at 13% and the UAE at 6%. Türkiye accounted for 4%, supranational issuers 3%, and Pakistan and Bahrain 2% each.
Sukuk represented 42% of the debt market in the GCC, compared with 59% in Malaysia, 18% in Indonesia and 8% in Türkiye. In emerging markets excluding China, sukuk accounted for 9% of all US dollar debt issued during the first half of 2026, down from 16% in 2025.
Sovereign issuers accounted for 41.7% of Fitch-rated sukuk outstanding globally at the end of the first half. Corporates and other issuers represented 18%, financial institutions 16.6%, supranational issuers 9% and international public finance 8.8%. Asset-backed structured finance accounted for 3%, infrastructure and project finance 2.9%, and residential mortgage-backed sukuk 0.2%.
Fitch said the direction of global issuance would depend on whether the US-Iran ceasefire holds and develops into wider regional stability. A more stable environment could support funding activity, while renewed escalation could weigh on sukuk growth. The agency expects full-year issuance to remain below its 2025 level.
Credit quality nevertheless remained resilient during the first half. Fitch said there had been no sukuk rating downgrades since the war began and no sukuk defaults since 2021.
Investment-grade instruments accounted for 82.6% of Fitch-rated sukuk globally. Sukuk carrying an ‘A’ rating represented 39.7% of the total, followed by ‘BBB’ at 25.5%, ‘BB’ at 10%, ‘AAA’ at 8.4%, ‘B’ at 7.4% and ‘AA’ at 5.4%.
About 80% of sukuk issuers had Stable Outlooks, down from 90.5% at the end of 2025. Around 11% were on Negative Outlook and 6% were on Rating Watch Negative.
Fitch also said GCC investment-grade sukuk offered lower yields than comparable GCC investment-grade bonds because of broader demand from Islamic banks. Liquidity among most Fitch-rated sukuk had improved compared with March 2026.
