Government spending helping drive project finance deals in UAE

Government spending helping drive project finance deals in UAE
Shimmy Mathew, CFO of KBW Investments.
Published: 9 August 2017 - 4:14 a.m.
By: Fatima De La Cerna

The UAE government is helping boost project finance in the country by continuing to spend on infrastructure projects.

Shimmy Mathew, chief financial officer of KBW Investments, noted that while some countries in the Middle East are struggling with liquidity challenges, the UAE has seen an increase in budget allocations for infrastructure development.

“The project finance climate in the region currently varies significantly, both by geography and by sector. The major factor limiting growth is, of course, the low oil price, which has hampered government spending in some countries in recent years, leading to a drain in liquidity for local banking sectors,” he told Construction Week.

He added: “However, in the UAE, the government is playing its part by continuing to spend on infrastructure, thus helping to drive project finance deals. The Dubai government’s budget for 2017 actually increased by 12% on last year, with a total of $4.52bn (AED16.6bn) set aside for infrastructure, transport, and economics.

“That is a rise of $490m (AED1.8bn) on the year before, and shows that the government here will continue to invest despite the low oil price, which is a great confidence booster for the market here. In addition, the advent of the World Expo, which will be hosted by Dubai in 2020, means that projects will continue to be awarded and that public spending will, therefore, continue.”

Sharjah is reportedly another emirate in the country that is showing not only resilience but also growth, despite challenging regional conditions.

“In Sharjah, where ARADA – a developer formed by a joint venture between KBW Investments and the Sharjah-based Basma Group – is active, a similar story is taking place,” said Mathew.

He added: “For 2017, the Sharjah government announced the largest budget in its history, with infrastructure spending increasing by 7% on the year before. This approach gives all stakeholders in the local construction industry, whether developers, contractors, banks or other finance outfits, confidence in the market.”

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