The Central Bank has slashed its foreign assets to one of its lowest levels in more than five years although its total assets have remained high.
Figures released by the Central Bank yesterday showed foreign assets tumbled to about Dh88.4 billion at the end of the first quarter of 2009 from Dh113bn at the end of 2008 and a record Dh285.6bn at the end of 2007.
But total assets rebounded to about Dh201.4bn at the end of March from Dh193.7bn at the end of 2008 after climbing to Dh285.9bn at the end of 2007, the Central Bank said in its statistical bulletin for the first quarter.
The decline in foreign assets in March slashed their ratio to total assets to only 44 per cent from as high as 99 per cent at the end of 2007.
The Central Bank gave no reason for the plunge in foreign assets but bankers attributed it to a steep fall in the banks' investment in Central Bank certificates of deposits (CDs) over the past 15 months and maturity of some of the foreign securities held by the Central Bank.
The figures showed CDs held by banks plunged from a record Dh173.5bn at the end of 2007 to one of their lowest levels of Dh32.7bn at the end of 2008 before recovering to about Dh39.4bn at the end of March. They further improved to nearly Dh58.3bn at the end of June.
Bankers said the decline in CDs value in 2008 was prompted by a decision by banks to withdraw their mature CD balance from the Central Bank to face a sharp growth in domestic credits and offset a shortage in incoming liquidity. The CDs issue peaked during 2007 as part of its strategy to stem soaring liquidity to tackle deteriorating inflation.
The move was reflected in a large decrease in the deposits by the country's 52 banks with the Central Bank as they dived from nearly Dh236.8bn at the end of 2007 to Dh108.1bn at the end of 2008. They slightly recovered to nearly Dh109.5bn at the end of March.
The Central Bank gave no breakdown for its assets at the end of March but for the end of 2008, the report showed the bank's deposits abroad dived to about Dh82.8bn from Dh184.04bn at the end of 2007.
Held-to-maturity foreign securities also slumped to Dh29.5bn from Dh98.8bn. The report also showed the Central Bank is investing about Dh55bn in held-to-maturity securities issued by the Ministry of Finance.
On the liabilities side, current account and deposits with the Central Bank grew to about Dh84.8bn at the end of 2008 from Dh65.2bn at the end of 2007. Total liabilities dipped to Dh178.6bn from Dh271.9bn.
The Central Bank's capital and general reserves remained unchanged at Dh300 million and Dh1.2bn at the end of 2008 while the permanent deposit by the UAE Federal Government swelled to about Dh16.08bn at the end of last year from Dh13.9bn at the end of 2007.
Despite the plunge in the Central Bank's foreign assets and deposits abroad, its net profits edged up by about 1.4 per cent to Dh3.832bn in 2008 from about Dh3.778bn in 2007, according to the report.
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