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UAE Central Bank may offer infusion of funds

The country’s banks are offering interest rates on deposits of up to 7 percent in efforts to attract funds.

June 14, 2010 10:53 by

The UAE’s Central Bank may issue a cash infusion, Emirates Business reported Monday, citing analysts concerns over data that show the country’s money supply slowed sharply in the first four months of 2010. Interest rates on deposits are up, around 7 percent, the report said, in efforts to attract funds following negative growth. Analysts say the higher interest rate offerings have failed to attract sufficient liquidity to UAE banks.

Other factors cited for tight liquidity conditions include a steep decline in government deposits with the UAE’s domestic and foreign banks, combined with a fall in the deposits of private establishments, the report added.

Ziad Dabbas, financial adviser at the government-controlled National Bank of Abu Dhabi, was quoted as saying that the country’s liquidity situation is “uncertain and ambiguous.” He added that the interest rate on deposits of 5-7 percent signals a dire need on the part of banks for an injection of funds. He also said that didn’t anticipate any major increase in deposits and that the Central Bank might need to intervene with an infusion of liquidity.

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