Money supply in UAE rises 8.4%

Dubai: The UAE Central Bank reported on Saturday that the money supply grew 8.37 per cent during the first quarter of this year.

The money circulating in the economy increased to Dh754.57 billion at end of March compared to Dh696.23 billion at the close of last year, the Central Bank said in a statistical statement published on its website.

Analysts said onday that the report confirms the role of money supply on the growing inflation in the country.

Last week, the Ministry of Economy said inflation was 11.1 per cent in 2007 as it climbed to 14.6 per cent in the last quarter of last year.

Alarming

"The money supply growth is alarming. It is the direct result of the fast expanding economy and negative real interest rates prevailing in the country," Dr Eckart Woertz, Programme Manager, Economics, of Gulf Research Centre told Gulf News on Saturday.

In the first quarter total bank assets increased more than nine per cent to Dh1.34 trillion, as consumer lending jumped by 11 per cent from Dh43.46 billion to Dh48.41 billion.

Although the UAE lacks interest rate flexibility to control lending due to the dirham's peg to the dollar, economists said quantitative restrictions on bank loans could be used to tackle money supply and inflation.

"The UAE could use other measures to tighten monetary policy such as increase in reserve requirements to limit loan growth," said Monica Malik, director of economics at EFG-Hermes.

The central bank also published the first quarter trade figures on Saturday. The trade surplus increased 59 per cent to Dh336.15 billion from Dh211.3 billion.