UAE says fiscal buffers 'will protect economy from cheap oil'

Central bank governor says fiscal position has 'reduced the potential impacts of such negative external shocks'
UAE says fiscal buffers 'will protect economy from cheap oil'
By Staff writer
Sat 28 Nov 2015 03:43 AM

Large fiscal buffers built up by the UAE's Central Bank will protect the local economy from the impact of global external factors such as low oil prices, its governor has said.

Mubarak Al Mansouri also said that monitoring and anticipating possible risks, while building on the lessons learned from the financial crisis, remains a priority for the UAE's Central Bank.

In a wide-ranging interview with Oxford Business Group, Al Mansouri said the Central Bank's strategies had been instrumental in cushioning the blow of lower oil prices and an appreciating US dollar on the domestic economy.

"This is reflected in recent IMF forecasts, which predict non-hydrocarbon growth of 3.5 per cent in 2015," he said. "The build-up of large fiscal buffers over recent years, in addition to a highly liquid and well-capitalised banking sector, have reduced the potential impacts of such negative external shocks."

Al Mansouri told Oxford Business Group that the Central Bank had moved to strengthen its liquidity management framework as a means of supporting banks and maintaining sustainable credit growth in a challenging global economic climate.

Introduced last year, the Interim Marginal Lending Facility (IMLF) provides banks with access to short-term Dirham funding by pledging eligible securities as collateral, while a newer Islamic equivalent, known as the Collateralized Murabaha Facility (CMF), puts Islamic banks on an equal footing with conventional lenders, he said.

Al Mansouri described Islamic banking as "a very important subsector of the UAE banking industry", adding that it was "well suited" for boosting lending in support of small business development, which remained a key national target.

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