UAE – Mubasher: Fitch Ratings has affirmed Ras Al Khaimah’s (RAK) long-term foreign-currency issuer default rating (IDR) at “A” with a stable outlook.

The rating is supported by the benefits of RAK's membership of the UAE, a low and declining government debt burden, and high gross domestic product (GDP) per capita, according to Fitch’s recent report.

The rating was also affected by the emirate’s small size and weaknesses in the policy framework, including the poor availability of economic data.

The American rating agency noted that the emirate derives substantial support from its membership of the UAE.

Moreover, it benefits from its access to the UAE's foreign exchange reserves and UAE support compensates for the lack of external sector data.

“Most public services and infrastructure are provided directly by the federal government, making RAK's spending more flexible than peers and relieving the emirate of some of the spending needs of a typical sovereign,” Fitch said.

In addition, close integration within the UAE has allowed Ras Al Khaimah to focus on its development strategy and build a relatively diversified economy dominated by manufacturing and services.

“We expect the debt of the government and its state-owned enterprises (SOEs) to fall to below 20% of GDP in 2019 from 33% in 2015,” the rating agency added.

SOEs will fall close to 17% of GDP in 2020, as the government uses value-added tax (VAT) receipts for the early repayment of AED 678 million of private placements.

“Fitch forecasts a fiscal surplus of 2.7% of GDP in 2019, largely underpinned by RAK's receipt of close to two years' worth of VAT, amounting to over 2% of GDP,” the report highlighted.