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28 March 2024

UAE public debt law moves closer

Published
By Zawya Dow Jones

A planned public debt management law for the UAE  - a key precursor to a first federal bond issue - will move closer to passing after the finance committee at the Federal National Council, the country's quasi-parliament, discusses it next week, said the committee's chairman.

Abdulla Nasser Al Mansouri, chairman of the Federal National Council, or FNC, committee on finance and economic affairs, said the committee will meet on December 21 to discuss an amended version of the draft law, an earlier version of which the FNC had approved last year.

"The government had their own additions to make to the law," Al Mansouri said on the sidelines of an FNC meeting. He didn't further explain what the additions are.

The FNC, the country's semi-elected legislature, reviews draft federal laws before they are sent to the UAE cabinet for final approval.

Last year, the FNC passed a draft of the public debt law, which caps the value of public debt- or debt issued by the federal government - to 45 per cent of the UAE's total GDP, or Dh300 billion ($82 billion), whichever is smaller. The legislation says "total local public debt should be at 15 per cent of the GDP."

Al Mansouri said the cabinet made additions to the draft, which will now be reviewed by the FNC's finance committee next week, before being presented to the full FNC for discussion at a later date. The bill would still require cabinet approval after that.

Government officials have said they expect the bill to pass before the end of 2010, although the government has already begun working on setting up a UAE public debt management office. Dubai, whose state-related companies have struggled with debt troubles, planned to set up its own emirate-level debt management unit to regulate borrowing, while Abu Dhabi's debt management office has been effectively active but not formally launched.

The UAE plans to sell federal bonds to help fund budgetary spending on infrastructure, the finance ministry's director general, Younis Al Khouri, said last year. Though the ministry hasn't given a timeline for a potential federal bond issue, the plan has been contingent on the setting up of a debt management office.

Al Khouri declined to comment on the status of the public debt law. He said the government was looking at "alternatives" to fund a Dh3 deficit projected for the 2011 budget.

Besides overseeing the selling of federal, sovereign debt for the first time - only individual emirates within the UAE have sold sovereign bonds - and controlling borrowing, the public debt law is also meant to encourage local-currency debt issues and build up a local debt market.