UAE Central Bank offers dollar loans against CDs

Dubai: The UAE central bank said it would start allowing lenders in the UAE to borrow in dollars against their certificates of deposit amid a shortage in the US currency as people bet on dirham revaluation.

Starting from Monday, banks in the country will be able to borrow dollars for as long as three months or at the maturity of their CDs, whichever is less, the central bank said in a statement yesterday.

"The facility is being granted to banks to meet their foreign currency requirements," Mohammad Abdullah Al Tamimi, assistant executive director in the central bank treasury department, said in the statement.

Further details would be given later, the central bank said.

Shortage

"There's a shortage of dollars in the market because everyone is betting on a revaluation of the dirham," said Jason Goff, head of group treasury and market sales at Emirates NBD, the Gulf's largest lender by assets.

The euro has gained about 30 per cent against the dollar in the last two years, making some imports to the Gulf more expensive and helping fuel inflation in the world's largest oil-exporting region.

Surging consumer prices, fuelled as record oil prices boost economic expansion, has encouraged investor speculation that some Gulf states will revalue their currencies or drop the dollar peg altogether to ease imported inflation. Kuwait did it in May.