UAE to Launch Dirham-Denominated T-Sukuk to Develop Local Currency Bond Market

(MENAFN) The United Arab Emirates (UAE) is set to launch an Islamic treasury sukuk, also known as T-sukuk, with a benchmark auction size of 1.1 billion dirhams ($299.5 million). The T-sukuk will be issued by the Ministry of Finance in collaboration with the Central bank of the UAE as part of the country's efforts to develop a local currency bond market. The issuance of the T-sukuk is expected to help the UAE diversify its financing resources, strengthen its local financial and banking industry, and provide safe investment options for both domestic and foreign investors, according to the Emirates News Agency, WAM.

The T-sukuk will be denominated in dirhams and will be initially issued in two-, three-, and five-year tenures, followed by a 10-year tenure later. The move is part of the UAE's goal to support investment options and alternatives that are compatible with Islamic Shariah provisions, develop the Islamic financial sector, and improve the investment environment. The issuance of T-sukuk will also help the country build a pioneering investment infrastructure to boost the Islamic economy as one of the fundamental foundations of the national financial system, said Mohamed bin Hadi Al-Hussaini, Minister of State for Financial Affairs.

Al-Hussaini emphasized that the T-sukuk are Shariah-compliant financial certificates that will be traded to reflect the local return on investment, support economic diversification and financial inclusion, and contribute to achieving comprehensive and sustainable economic and social development goals. Additionally, he pointed out that this issuance will aid in the development of the yield curve for debt in the UAE, which will strengthen the regional financial system and improve the investment environment.

The Ministry of Finance and the Central Bank of the UAE are collaborating with key government organizations and international financial bodies to ensure that best practices are followed while constructing T-sukuk, the report added. In addition, the ministry has published a robust "Primary Dealers" code and has onboarded eight banks to participate in the T-sukuk primary market auction while actively developing the secondary market. These banks include Abu Dhabi Islamic Bank, Dubai Islamic Bank, and Abu Dhabi Commercial Bank, as well as Emirates NBD, First Abu Dhabi Bank, HSBC, Mashreq, and Standard Chartered.

Khaled Mohamed Balama, Governor of CBUAE, also emphasized the importance of issuing Islamic treasury sukuk in developing local sukuk markets, diversifying financing resources, and strengthening infrastructure. He said that the move will enhance the competitiveness of the local financial markets and enable market participants in the UAE to maintain a single, transparent, diversified, and sustainable liquidity pool in dirhams.

Overall, the issuance of T-sukuk is a significant step towards the development of a local currency bond market in the UAE. The move reflects the country's commitment to promoting Islamic finance and supporting sustainable economic growth.

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