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- Dubai 05:29 06:47 12:13 15:10 17:33 18:51
A huge outflow of speculative money plunged the UAE balance of payment into its largest ever deficit in 2008 after recording its highest surplus in the previous year, according to official figures.
From a surplus of about $49.8 billion (Dh182.7bn) in 2007, the balance of payment suffered from a record deficit of $46.9bn in 2008, showed the figures published by the Abu Dhabi-based Arab Monetary Fund (AMF), a key financial establishment of the Arab League.
A breakdown showed the deficit was caused mainly by a massive shortfall in the capital and financial account balance, which includes the difference of money outflow and the net influx of funds from overseas investors.
After recording its highest surplus of $28.7bn in 2007, the capital and financial account plunged into a record deficit of $53.2bn in 2008, said the AMF, an IMF-style Arab organisation.
Speculative money poured into the UAE through 2007 and the first half of 2008 following rising speculation about a revaluation of the country's dirham against the dollar as part of the planned GCC monetary union.
The trend was reversed after the UAE made clear it has no intention to appreciate its currency and stressed its commitment to the dollar.
The position was strengthened by the country's decision to pull out of the Gulf monetary union in 2009 because of a row over the GCC central bank headquarters.
In statements last year, Central Bank Governor Sultan bin Nassir Al Suwaidi said 90 per cent of the speculative funds had left the UAE, while bankers estimated them at more than $50bn.
The balance of payment deficit in 2008 was the first to be recorded by the UAE since 2002, when the shortfall stood at $413 million.
The deficit occurred despite a sharp increase in the UAE's oil exports due to a surge in crude prices in 2008.
As a result, the country's current account, involving the net difference between import and export of goods and services plus investment income, recorded a surplus of $17.2bn.
Bankers said the UAE was the only major Gulf oil producer to suffer from a balance of payment gap in 2008 as its neighbours were less targeted by hot money given the relatively more liberal financial system of the UAE, the second-largest Arab economy after Saudi Arabia.
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