UAE issues federal law on public debt

The UAE’s finance ministry has announced a public debt law permitting the federal government to begin issuing sovereign debt and help the banking sector meet international liquidity rules, state news agency WAM reported on Saturday.

The law will enable banks to purchase government bonds in dirhams or foreign currencies, which will help them comply with Basel III requirements.

The issuance of sovereign bonds will support the UAE Central Bank's role in liquidity management in the banking system and help benchmark the UAE dirham yield curve, deepening the local financial market for financing of companies operating in the country, the report noted.

The federal debt law will support the establishment of a secondary market for government securities through which public debt instruments can be traded in UAE financial markets.

A "Public Debt Management Office" will be established at the Ministry of Finance to propose public debt management strategies and policies in coordination with the Central Bank, the report added.

“The new federal government debt law will create deeper, more resilient financial markets, benchmark the yield curve, provide more diversified sources of financing, mobilize additional domestic savings and attract capital inflows," said Mubarak Rashed Al Mansoori, governor, UAE Central Bank.

"The development of vibrant public and private bond markets (including Sukuk) will also facilitate compliance with liquidity requirements (Basel III), and allow investors to balance risks in more diversified portfolios," he noted.