Image Credit: Supplied

Abu Dhabi: The UAE expects to set up a debt management office this year after a law on public debt is issued, and before it considers any issues of sovereign bonds, Minister of State for Financial Affairs Obaid Humaid Al Tayer said yesterday.

"First, the law on public debt needs to be issued," Al Tayer said.

The move is designed to help the country to better monitor and manage its debts.

The Federal National Council (FNC) last year passed the draft Public Draft Debt Law that stipulated that the total value of the country's public debt should not be more than 45 per cent of GDP or Dh300 billion, whichever was less.

The law stipulated that total local public debt should be not more than 15 per cent of GDP. The public debt office would be established in the Ministry of Finance.

The competent authority in each emirate would also set up public debt offices to monitor the debt exposure across the emirates and at federal level.

Younis Al Khoury, director-general in the Ministry of Finance, said the UAE had no immediate plans to sell federal bonds. "Preliminary predictions show the government does not need to borrow," Al Khoury said.

Separately, UAE Central Bank Governor Sultan Nasser Al Suwaidi said Dubai World's discussions with lenders on the restructuring of its debt were well on course. "We hear the discussions are going very well," he said.

Asked if he saw the spectre of large corporate debt restructurings across the UAE, Al Suwaidi replied in the negative. Al Suwaidi also said UAE banks were in good health.

"I think the banking system is highly capitalised, highly reserved," said Al Suwaidi.

However, there was continual demand for borrowing by individuals, he said.

Asked whether the UAE would be affected by sovereign debt issues some countries in Europe such as Greece were currently grappling with, Al Suwaidi replied: "There will be no impact."

The governments of the 16 euro nations will lend 750 billion euros to countries under attack from speculators.

On the exposure of UAE banks to Greece's debt, Al Suwaidi said: "There will be nothing significant."

Moody's Head Analyst for Middle East Sovereigns Tristen Cooper said at the conference the UAE's external asset position was "strongly positive, despite contingent liabilities building into the system".

New measures shortly

The UAE is considering new initiatives to tackle the problem of a rising number of bounced cheques, said Ali Ebrahim, deputy director general of Dubai's Department of Economic Development.

Ebrahim, who is also managing director of Dubai-based Emirates Credit Information Company Limited, declined to comment when asked by reporters what those initiatives may include.

He was speaking at an Emcredit news conference in Dubai yesterday.

"You will hear very soon a new initiative regarding that in the next two to three weeks," Ebrahim told the conference.

The number of bounced cheques and the value of bad loans in the UAE have risen as the economy was hurt by the global credit crisis and companies cut jobs.

According to a decree by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Miniser of the UAE and Ruler of Dubai on May 3, Emcredit was assigned the role of providing credit information services in the emirate.

How will this help the economy? What more could the country do to secure its economy?