UAE plans to sell bonds: Al Suweidi
The UAE will sell its first bonds to develop the "tools for monetary policy," central bank Governor Sultan bin Nasser Al Suweidi said.
The nation plans to sell conventional and Islamic securities, known as sukuk, this year with maturities of up to 30 years, Al Suweidi said in an interview in Abu Dhabi. He declined to comment on the currency-denomination of the bonds.
The UAE, the second-largest Arab economy, is seeking additional ways of controlling inflation as the falling dollar pushes up import prices. Inflation accelerated to a record 9.8 per cent last year, from 9.3 per cent in 2006, according to the median forecast of seven economists surveyed by Bloomberg News.
Selling government bonds will also help to develop the nation's corporate debt market, Al Suweidi said.
The government aims "to develop tools for the stability of the financial markets and an additional tool for monetary policy," he said in yesterday's interview.
The central bank replaced its system of selling certificates of deposit with an auction process on November 28, extending the maximum maturity to five years from 18 months. Interest rates have fallen since then as increased liquidity in the banking system translates into higher demand for the CDs, Al Suweidi said. Appetite for longer-term paper has yet to develop as he had hoped, he said.
The creation of a bond market will help the central bank to "take liquidity straight from the general public," Al Suweidi said.
"We will compete with bank deposits."
The UAE has a sovereign rating of Aa2 at Moody's Investors Service, two steps below than the highest investment- grade level. The three largest emirates, Abu Dhabi, Dubai and Sharjah, are seeking to get a common rating, Al Suweidi said.
The central bank has no plans to raise banks' reserve requirements because current levels are already higher than most of the nation's Gulf neighbours, Al Suweidi said.
"We impose 14 per cent on current, savings and call accounts," he said.
"For time deposits we take one per cent. In total it probably equals what Saudi Arabia has introduced."
Saudi Arabia raised the reserve requirement for banks to nine per cent from seven per cent on November 1. Qatar increased its requirement to 3.25 per cent on December 11. Source
The nation plans to sell conventional and Islamic securities, known as sukuk, this year with maturities of up to 30 years, Al Suweidi said in an interview in Abu Dhabi. He declined to comment on the currency-denomination of the bonds.
The UAE, the second-largest Arab economy, is seeking additional ways of controlling inflation as the falling dollar pushes up import prices. Inflation accelerated to a record 9.8 per cent last year, from 9.3 per cent in 2006, according to the median forecast of seven economists surveyed by Bloomberg News.
Selling government bonds will also help to develop the nation's corporate debt market, Al Suweidi said.
The government aims "to develop tools for the stability of the financial markets and an additional tool for monetary policy," he said in yesterday's interview.
The central bank replaced its system of selling certificates of deposit with an auction process on November 28, extending the maximum maturity to five years from 18 months. Interest rates have fallen since then as increased liquidity in the banking system translates into higher demand for the CDs, Al Suweidi said. Appetite for longer-term paper has yet to develop as he had hoped, he said.
The creation of a bond market will help the central bank to "take liquidity straight from the general public," Al Suweidi said.
"We will compete with bank deposits."
The UAE has a sovereign rating of Aa2 at Moody's Investors Service, two steps below than the highest investment- grade level. The three largest emirates, Abu Dhabi, Dubai and Sharjah, are seeking to get a common rating, Al Suweidi said.
The central bank has no plans to raise banks' reserve requirements because current levels are already higher than most of the nation's Gulf neighbours, Al Suweidi said.
"We impose 14 per cent on current, savings and call accounts," he said.
"For time deposits we take one per cent. In total it probably equals what Saudi Arabia has introduced."
Saudi Arabia raised the reserve requirement for banks to nine per cent from seven per cent on November 1. Qatar increased its requirement to 3.25 per cent on December 11. Source
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