No impact from US debt crisis on UAE

The UAE Central Bank on Thursday sought to assure the public that it would not be affected by the US debt crisis on the grounds it currently has no US treasury bonds or other financial tools issued by the US government.

In a statement, the Central Bank said it was reacting to questions from the local and foreign media on whether the US debt crisis has any impact on its assets.

“The Central Bank of the UAE currently possesses no US treasury bonds or any other financial instruments issued by the US government due to the very low return on holding these instruments,” the statement said.

“We believe that the debate on the US public debt ceiling issue will end with a compromise solution before the deadline date.”

The Central Bank said there was no need to imagine that the US government may default on its debts given its “enormous potential”.

“We had seen in the past under President (Bill) Clinton, the US economy's ability to reduce its public debt,” it said.

The statement said the central bank is not worried about the US dollar, although it is exposed to price fluctuations as it happens with all the major currencies.

“Despite the fact that the Central Bank foreign reserves are mostly denominated in US dollars, they are invested mostly in non-US assets. Eventually these investments are not obligations on the US government,” it said.

“There is no direct link between the dollar-denominated assets and the US Government debt… as for the peg of the dirham to the US dollar, it is steady and consistent.”