UAE 'must create local bonds market'
Abu Dhabi, June 1, 2011
The United Arab Emirates needs to double efforts to create a local market for government and corporate bonds, Central Bank Governor Sultan Nasser Al-Suweidi said.
"When it comes to adequacy and quality of capital, we don't have any difficulty in securing capital adequacy in the short run," he told a financial workshop in the UAE capital.
"As for liquidity, the difficulty lies in the fact that there are no sufficient government debt instruments. It will be important to double efforts locally to create an active market for government bonds as well as high quality corporate bonds," he said.
The UAE is in the final stages of approving a law which will allow the government to issue its first federal sovereign bonds and create a local debt market, the finance ministry said in May.
Regional unrest has boosted liquidity in the UAE banking system, seen as a safe haven among neighbours undergoing political upheaval, but lending remains muted.
The proposed legislation would limit government debt to 25 percent of gross domestic product, or 200 billion dirhams ($55 billion). The International Monetary Fund projects that UAE government debt, including that of some of its seven emirates, to fall to 16.4 percent of GDP this year from 21.0 percent in 2010.
The government of Abu Dhabi, the largest and wealthiest of the seven emirates which make up the UAE, is putting in place plans to curtail bond sales by state companies in a bid to ease through the sale of corporate bonds. -Reuters