The government of the UAE will further discuss its plan to introduce a law allowing public debt issues at the federal level, and it feels no pressure to issue bonds despite a budget deficit, said Obaid Humaid al-Tayer, minister of state for Financial Affairs.
“The law is still under discussion within the government. We are not under pressure to issue any bonds,” Tayer told Reuters in a brief interview.
“We are in no need to finance anything. We will be able to bridge the (budget) gap with our own resources.”
Tayer did not say when he expected the long-awaited debt law to be signed, but added that discussions were likely to resume after the summer period.
The UAE’s top advisory council passed the public debt bill in December 2010, aiming to establish a local debt market in the world’s number three oil exporter. The legislation is still awaiting cabinet approval and the presidential signature which it needs to become law.
A senior finance ministry official said in February that he expected the UAE’s first-ever federal sovereign bond issue to be around $1 billion, and that it would take place after the public debt bill was approved. Federal government bonds would be issued at intervals to help finance infrastructure projects.
The ministry has gradually shifted expectations for the timing of its bond issuance. In June 2011, Tayer told Reuters the UAE might issue its first federal bond toward the end of 2012, with the debt bill then expected to be signed in the summer of 2011.
The UAE’s central bank governor said in the same month that the UAE, rated Aa2 by Moody’s, needed to double efforts to create a local market for government and corporate bonds as it lacked sufficient government debt instruments.
Some of the UAE’s seven individual emirates have already sold government debt, including Abu Dhabi and Dubai, whose state-linked firms also borrow.
The federal budget, which makes up 11 per cent of overall government spending in the UAE, ended in an estimated deficit of Dhs2.9 billion ($790 million) in 2011, the first gap in seven years, a report by the International Monetary Fund, based on government data, showed earlier in June.
Last October, the UAE government approved a draft 2012 federal budget of Dhs41.8 billion with a small projected shortfall of Dhs400 million.