Law lets UAE fed­eral govt is­sue bonds

Khaleej Times - - FRONT PAGE - Staff Re­port

dubai — The Pres­i­dent, His High­ness Sheikh Khal­ifa bin Zayed Al Nahyan, has is­sued a new law al­low­ing fed­eral govern­ment to is­sue sov­er­eign bonds, says a tweet by the Min­istry of Fi­nance.

This ini­tia­tive will help the cen­tral bank man­age liq­uid­ity in the mar­ket and bet­ter man­age pub­lic debt.

Sev­eral of the seven emi­rates in the UAE al­ready sell bonds in in­ter­na­tional mar­kets.

Al­low­ing the cen­tral govern­ment to is­sue sov­er­eign bonds could ben­e­fit the fed­eral bonds which would carry higher credit rat­ings.

Banks in the UAE will be able to buy govern­ment bonds in dirhams, or for­eign cur­ren­cies, giv­ing them highly-rated as­sets with which they can man­age their liq­uid­ity and obey global Basel III reg­u­la­tory stan­dards for banks, the min­istry said.

The cen­tral bank will, mean­while, use the bonds to help man­age the in­ter­bank money mar­ket, while the bonds will sup­port the cre­ation of a sec­ondary mar­ket in govern­ment debt. This will de­velop a UAE dirham yield curve serv­ing as a ref­er­ence for lo­cal com­pa­nies to is­sue debt, the min­istry added.

The long-awaited law, which was in prepa­ra­tion for sev­eral years, also pro­vides for the cen­tral govern­ment to es­tab­lish a Pub­lic Debt Man­age­ment Of­fice at the min­istry.

The of­fice will pro­pose poli­cies in co­or­di­na­tion with the cen­tral bank, mon­i­tor risks linked to debt, set short- and long-term tar­gets and ad­vise the fi­nance min­is­ter on in­vest­ing any pub­lic debt sur­plus.

The of­fice will also co­or­di­nate with lo­cal gov­ern­ments to sup­port the is­suance of pub­lic debt in­stru­ments in the in­di­vid­ual emi­rates, and ev­ery lo­cal govern­ment is­su­ing in­stru­ments will es­tab­lish its own debt of­fice.

The UAE has no ur­gent need to is­sue fed­eral debt. Its con­sol­i­dated fis­cal deficit, in­clud­ing in­di­vid­ual emi­rates as well as the fed­eral govern­ment, is ex­pected to re­main sta­ble at about 1.6 per cent of gross do­mes­tic prod­uct this year and turn to a sur­plus next year, the In­ter­na­tional Mone­tary Fund says.

UAE Pres­i­dent Sheikh Khal­ifa bin Zayed Al Nahyan.

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