Rak budget returns to surplus

Ras Al Khaimah (Rak) debt fell last year and is expected to come down further this year while its budget also returned to surplus in 2010, according to an international ratings agency.

The emirate’s debt – which had shot up to over 30 per cent of gross domestic product (GDP) in 2009 – has fallen below 30 per cent and will fall closer to 20 per cent by the end of this year, Fitch Ratings said in a statement to Emirates 24l7 on Tuesday.

"Ras Al Khaimah has significantly bolstered its creditworthiness over the past year. The budget has moved back into surplus, debt has begun to decline and the debt maturity profile has benefited from proactive debt refinancing," said Richard Fox, Head of Middle East and Africa Sovereign Ratings at Fitch.

It also affirmed the emirate’s long-term and local currency rating at “A” with stable outlook.

“(Rak) debt fell below 30 per cent of GDP in 2010 and the combination of a budget surplus and asset sales, as Rak re-focuses on its core comparative advantages, will see debt fall nearer to 20 per cent of GDP by the end of 2011, virtually half the forecast 'A' category median of 45 per cent,” the statement said.
With the completion of development projects, the ratings agency said, the emirate’s overall budget has returned to surplus.

“After five years of sizeable overall deficits, peaking at 9.6 per cent of GDP in 2009, the budget registered a surplus of 4.5 per cent of GDP last year and this is forecast to increase to six per cent this year. With debt pay down being financed from sales of non-core assets, cash balances are forecast to increase so that net debt will fall even faster than gross debt,” Fitch Ratings said.

Rak has been adept at finding new markets for its products in response to the varying fortunes of key countries in the region. Its main markets outside the UAE are now Qatar, Saudi Arabia and Kuwait. The region’s continuing infrastructure spending plays to RAK's comparative advantage in construction materials and basic manufacturing.