UAE net foreign assets widen

A decline by nearly Dhnine billion in total foreign liabilities largely boosted the UAE’s net foreign assets in September and maintained its position as a net credit to the global markets, according to official figures.

From around Dh47.9 billion at the end of August, the country’s net foreign assets, the difference between total foreign assets and foreign liabilities, surged to nearly Dh54.3 billion, an increase of about Dh6.4 billion, showed the figures published by the Central Bank’s monthly statistical bulletin.

The increase boosted the UAE’s net foreign assets to their second highest level in more than three years. They climbed to one of the highest level of Dh58.6 billion at the end of July after a surge of about Dh28 billion in foreign assets.

The figures showed the increase in September was a result of a decline in foreign liabilities, which shrank to around Dh267 billion at the end of September from Dh276.2 billion at the end of August, a drop of about Dh8.8 billion.

Total foreign assets also dipped to around Dh321.4 billion from nearly Dh324.2 billion in the same period, the report showed.
The decline in foreign assets was mainly in those held by UAE banks as the foreign assets of the Central Bank slipped by just around Dh200 million to nearly Dh94.5 billion from Dh94.7 billion during that period.

The foreign assets of the country’s 23 national banks and 28 foreign units receded by more than Dhtwo billion to Dh226.2 billion from Dh228.8 billion.

A breakdown showed the bulk of the decline in foreign liabilities was in deposits of foreign banks with UAE banks as they tumbled by around Dhseven billion to nearly Dh57.5 billion at the end of September.

Such deposits have sharply fluctuated this year but they remained far lower than their level of around Dh93.1 billion at the end of 2009.

This means foreign banks siphoned nearly Dh36 billion out of the UAE in the first nine months of this year to push them to one of their lowest levels in four years and reverse a massive inflow of speculative money.

The withdrawal this year boosted the total funds repatriated by foreign banks to around Dh118 billion through 2009 and the first nine months of 2010.

The deposits by foreign banks had hit an all time high of nearly Dh211 billion at the end of April 2008 at the height of speculation that the UAE and other Gulf oil producers would appreciate their currencies against the US dollar.

Speculation began to recede after the UAE Central Bank repeatedly ruled out such plans and came almost to a standstill last year after the country decided to withdraw from the monetary union launched by Saudi Arabia, Kuwait, Qatar and Bahrain. The other GCC member, Oman, also pulled out in late 2007.

The drive by speculators to take their funds out of the UAE and other Gulf nations gained momentum after the eruption of the 2008 global fiscal crisis as foreign banks struggled to meet commitments and bridge a liquidity gap at home.

The plunge in the foreign banks’ deposits at the end of September pushed them to their lowest level since mid 2006, when they stood at around Dh75 billion.

They swelled to nearly Dh96.7 billion at the end of 2006 and shot up to about Dh205 billion at the end of 2007. In April 2008, they climbed to a record high level before they began to fall back in the aftermath of the crisis to reach nearly Dh175.6 billion at the end of 2008, according to the Central Bank.

Analysts estimate that more than Dh130 billion in hot money has left the UAE since the eruption of the crisis in September 2008.

Despite the withdrawal of those funds, overall deposits with the UAE’s 23 national banks and 28 foreign units gained around Dh31 billion to swell to Dh1,013 billion at the end of September from about Dh982 billion at the end of 2009 and nearly Dh912 billion at the end of 2008.

The rise was a result of a sharp increase in individual deposits, which grew to nearly Dh279 billion at the end of September from Dh259 billion at the end of 2009. Private sector deposits also grew to Dh378 billion from Dh372 billion while government deposits dipped by Dh13 billion to Dh179 billion from Dh192 billion.

Monetary indicators for October released by the Central Bank this week showed the banks’ total deposits gained a staggering Dh40 billion last month.
 

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