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Abu Dhabi: Federal treasury bills will be issued within a year and will be used to stabilise the dirham and lift the revenues of the federal budget, a top official said on Sunday.
The UAE government is seeking to expand federal revenues to meet the ambitious goals set by the federal strategic plan announced by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai, in April 2007, as well as the recommendations proposed by the International Monetary Fund (IMF) and the World Bank group by introducing value-added tax (VAT) and establishing a long-term debt market in the country.
The total federal revenues for 2008 is estimated at Dh34.9 billion, of which 44 per cent is contributions from the emirates of Abu Dhabi and Dubai, and almost 20.9 per cent comes from etisalat, which reflects the limited diversity in resources according to many economists.
"We are working on the issue and it should not take us more than a year to finalise," Sultan Bin Nasser Al Suwaidi, Governor of the UAE Central Bank, told Gulf News.
"We will not utilise all the funds raised through treasury bills to support the federal budget, as we intend to use it for stabilising the dirham's position as well," he said.
The absence of a long-term debt market has been posing difficulties to many businesses in the UAE owing to heavy speculations on the local currency.
"The problem can only be solved when a long-term interest swap market is established for the dirham and hence we are keen to see the government issuing 20 and 30 years dirham-denominated bonds," Greg Fewer, project and corporate finance advisor at Mubadala Development, told Gulf News.
"What we need is the long-term yield curve which represents an important instrument for our monetary policy," Al Suwaidi said.
The governor reiterated that the funds will not be utilised totally to directly expand the federal revenues, suggesting that certain amount will be also invested by the government. "Issuing federal treasury bills is important to developing our debt market," he said.
Borrowing: Facility extended
The UAE Central Bank said yesterday it would allow Islamic banks to borrow up to $200 million per day against their certificates of deposit (CDs) to help them cope with a dollar shortage.
In March, the central bank started allowing commercial banks in the world's fifth-largest oil exporter to borrow dollars for as long as three months in a response to the global credit crisis. Islamic banks, whose borrowing needs are different from the commercial banking sector because they cannot pay or receive interest, would also be able to borrow dollars from the central bank, it said in a statement on its website.
- Reuters
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