Abu Dhabi: The UAE may issue its first sovereign bond toward the end of the year or early next year, Obaid Humaid Al Tayer, Minister of State for Financial Affairs, said yesterday.
The Federal National Council (FNC) passed a new public debt law last month, paving the way for the country's first debt issues at the federal level.
Asked when he expected to issue new bonds, Al Tayer told reporters on the sidelines of an FNC meeting that "either at the end of this year or the first part of next year".
Al Tayer declined to provide details, saying he hoped the public debt bill would be approved by President His Highness Shaikh Khalifa Bin Zayed Al Nahyan this year.
The minister told the House last month that the UAE at present has no public debt as defined under the law.
Debt cap law
The legislation, which requires the President's signature to become law, caps the UAE's public debt at 25 per cent of the country's gross domestic product, or Dh200 billion ($54.5 billion), whichever is smaller.
The bill also provides a legal framework to create a government bond market with public debt instruments traded on one or more of the country's three financial markets.
The UAE has so far seen sovereign bonds issued only by individual emirates such as Abu Dhabi and Dubai, and analysts have said federal issues would help revive the local currency debt market.
The global credit crunch slammed the brakes on an oil- and real estate-led boom in the UAE, sending the world's fourth-largest oil exporter in 2009 into its first economic downturn since 1993.
Debt problems in property-focused Dubai slowed recovery last year.
Range of options
Al Tayer said last month the country would look at a range of options, including using existing reserves or returns from government investments to finance a budget deficit of around Dh3 billion for 2011 and issue bonds only when necessary to cover the gap.
- Dh200b: ceiling on publicdebt proposedby draft law
- 25%: proposed capon public debtin relation to GDP
- Dh3b: UAE's estimated budget deficit for 2011
FNC passes law to raise Emarat debt ceiling
The Federal National Council (FNC) on Tuesday passed a draft law allowing the Emirates General Petroleum Corporation (Emarat) to raise its debt ceiling to 50 per cent of its capital.
During the course of its meeting yesterday, members of the House argued that more indebtedness would result in higher expenses and an increase in petrol prices, which would, in turn, lead to an inflation in prices of commodities and services.
Obaid Humaid Al Tayer, Minister of State for Financial Affairs, told the House that Emarat was being restructured and is in need of credit facilities.
Hamad Harith Al Midfa, a representative from Sharjah, suggested liquidating the corporation, but Dr Aisha Al Roumi, another member from Sharjah, said liquidation was not the proper solution.
The State Audit Institution put Emarat's debt at the end of 2010 at approximately Dh1.9 billion, but the general manager of the corporation told FNC members that debt reached Dh3 billion.
Al Tayer said until 2007, Emarat was posting profits. "But the wild swing in oil prices led to huge losses. The cost of a litre of petrol is Dh1 higher than the selling price."
He said Emarat was being restructured and reviewing its cost base, investments and expansion.
