UAE assets to peak at $600bn

Most of assets are controlled by ADIA and other SWFs

The UAE’s foreign assets were estimated at around $550 billion at the end of 2010 and they could soar to a record high of nearly $600bn at the end of 2010, according to a key western financial firm.

The assets, controlled mostly by the Abu Dhabi Investment Authority (Adia), have already climbed close to $600 billion and could reach that level at the end of next year, the Washington-based Institute for International Finance (IIF) said in its latest semi annual report on the Middle East and North Africa.

The rise means the UAE will maintain its position as having the largest foreign assets in the region thanks to a surge in oil prices and its crude output as well as improvement in global markets through 2010 and the first half of 2011.

The massive funds, built up through petrodollar savings over the past four decades, will allow the UAE to finance fiscal deficits for many years in case crude prices dipped below the breakeven price for the country’s budget.

“We project total gross foreign assets of the UAE to continue rising to about $600 million by end-2012. This would result in an overall net external asset position of about $480bn, equivalent to 130 per cent of 2012 projected GDP,” IIF said.

“Such large financial resources will be more than adequate to finance likely fiscal deficits for several years if oil prices fall below $85/b (which is the estimated breakeven price of oil that balances the consolidated 2011 budget for the UAE).”

IIF said the assets are controlled by Adia, Abu Dhabi-based Mubadala and International Petroleum Investment Co (IPIC), the UAE central bank and sovereign wealth funds in Dubai. It gave no breakdown but analysts said Adia controls more than two thirds of those assets.

The report showed the foreign assets had steadily climbed over the past two years following a sharp fall in the wake of the 2008 global financial distress.

The assets plunged from around $470bn at the end of 2007 to nearly $400bn at the end of 2008 as a result of market turmoil after the September crisis. But they sharply rebounded to nearly $470bn at end-2009 before swelling further to about $530bn at the end of 2010.

The assets continued to climb through 2011 to reach their highest level of just under $600bn in September, nearly triple their level of $200bn in 2004.

ADIA, created by late Sheikh Zayed bin Sultan Al Nahyan in early 1970s, is believed to be the world’s largest SWF. It was established with the aim of saving excess oil revenue to ensure funds for future generations support the country’s fiscal balances and create a cushion against crude price fluctu.

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