Arab central banks more than doubled their deposits with the Arab Monetary Fund (AMF) in 2008 and the bulk of the deposits were channelled into bank deposits and securities abroad.
From around $2.66 billion (Dh8.3bn) at the end of 2007, the deposits with the AMF by 17 Arab central banks jumped to nearly $5.63bn at the end of 2008, the Abu Dhabi-based financial institution said in its annual report, obtained yesterday.
It showed the bulk of those deposits were placed in bank deposits and "safe investment tools" abroad in line with the AMF's "conservative" investment policy.
As a result, the AMF's deposits with banks abroad soared from around $2.9bn at the end of 2007 to nearly $5.65bn at the end of 2008.
Investments in bonds and other securities swelled from about $2.72bn to around $3.14bn in the same period, said the AMF, the Arab League's main financial organisation, which is responsible for supporting the economic and financial systems of member states through loans and technical assistance.
The AMF, an IMF-styled regional institution, said the sharp rise in the deposits by the Arab central banks boosted its total assets from around $7.27bn at the end of 2007 to a record $10.54bn at the end of 2008.
"Besides investing its own financial resources, the AMF has added a new function to its investment activities, including utilising the deposits from the Arab central banks and other financial and monetary institutions in member states by channelling them into safe investment tools abroad," the report said.
"Such deposits recorded a sharp rise last year compared with 2007 and they involved deposits in US dollar, British pound and euro from 17 Arab central banks and financial and monetary establishments. These deposits are now in safe investment tools involving bank deposits, and short, medium and long-term bonds.
The AMF, which was created nearly 33 years ago by most Arab governments, said its conservative investment policies allowed it to withstand the effects of the global financial turbulence and the collapse of world markets and securities.
While the fund did not suffer from losses in its overseas investments, its balance sheets showed there was a decline in its earnings in 2008 mainly because of a reduction in the income from its investments.
From around $167.7 million in 2007, return from its investments abroad dipped to $43.3m in 2008. But the decline was partly offset by a surge in interest on the fund's loans to member countries and on its deposits with other banks.
Interest paid by the AMF to Arab central banks also slipped from $134.4m in 2007 to about $124.7m in 2008. The report showed the AMF's net earnings slumped from $168.2m to nearly $139.4m in the same period.
"Following the aggravation of the global financial crisis in late 2008, the AMF adopted a new policy of giving utmost concern to security and safety of its investments abroad… in such exceptional circumstances, the AMF sought to achieve a great degree of safety for its financial resources by channeling them into secure instruments, mostly in bank deposits and bonds," it said.
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