The UAE on Saturday issued a new law permitting the federal government to begin issuing sovereign debt.
Abu Dhabi and Dubai already sell bonds in international markets but the new legislation will enable the government to help benefit other emirates as federal bonds would carry higher credit ratings than those emirates could achieve individually.
According to state news agency WAM, banks in the UAE will be able to buy government bonds in dirhams or foreign currencies, while the central bank will use the bonds to help manage the interbank money market, and the bonds will support the creation of a secondary market in government debt.
The law will also establish a Public Debt Management Office at the finance ministry, WAM added. The office will be responsible for proposing public debt management strategies and policies in coordination with the central bank and will monitor financial risks.
It will set short and long-term objectives for the nation’s public debt management, as well as issue reports on the management and implementation of public debt.
Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance, said: “This law will have substantial returns for the state, as it will anchor the development of the sovereign debt management according to best international practices, and will have a significant positive impact in upgrading the state’s macroeconomic management and better coordination between fiscal and monetary authorities, reducing the cost of borrowing and boosting the state’s credit rating.”
He added: “The law will contribute to enhancing the state’s competitive ranking, boost investors’ confidence in the national economy and raise transparency regarding management of public finances to allow for greater opportunities for the national economy and better integration into the global economy.”