The United Arab Emirate's top advisory council passed a new public debt law on Tuesday, marking a key step toward the issuance of the Gulf Arab state's first sovereign bond. The law was approved by the Federal National Council, a quasi parliamentary body which monitors and debates government policy but cannot initiate legislation by itself.
The legislation, which needs presidential approval to become law, limits government debt to 25 percent of the country's gross domestic product, or 200 billion dirhams ($54.45 billion). An earlier version of the legislation discussed last year had said public debt should not exceed 45 percent of GDP, or 300 billion dirhams. The bill provides a legal framework for creating a government bond market in the UAE with public debt instruments traded on one or more of the country's three financial markets.
The UAE has said it will consider a federal bond after the passage of the debt law and the creation of a debt management office. Under the new law, the Gulf state will create a public debt bureau to advise the government on debt issuance and work with the central bank on issuing and selling government bonds and other financial instruments.
The law also stipulates that debt issued for infrastructure projects should not exceed 15 percent of public debt. The global credit crunch slammed the brakes on an oil- and real estate-led boom in the UAE, sending the Gulf state into its first economic downturn since 1993. Debt problems in property-focused Dubai have hampered recovery in 2010. The country will look at a range of options, including using existing reserves or returns from government investments to finance a budget deficit of around 3 billion dirhams ($816.8 million) for 2011, Al Tayer said.
Comments
Comments are closed.