Abu Dhabi, March 3 (IANS/WAM) The UAE has no intention to de-peg its currency, the dirham, from the US dollar because the US currency ensures economic stability and the Gulf nation's investments are basically in US dollars, Mubarak Rashed Al Mansoori, the governor of the UAE Central Bank, has said.
"We are fortunate in the UAE to have pegged the dirham to the US dollar. A strong dollar offsets some of our losses as part of oil exports. As an oil producer, we export oil and other services to neighbouring countries whose local currencies are also pegged to the dollar," Al Mansoori told the seventh Global Financial Markets Forum (GFMF), the annual conference organised by the National Bank of Abu Dhabi (NBAD), which concluded on Monday in Abu Dhabi.
In a joint discussion panel with Hamood Sangour Al Zadjali, executive president of the Central Bank of Oman, on regulators' views on market opportunities and risks, Al Mansoori said the developments in the global economy were confusing and interesting as a result of US economic growth, slowdown of the European economy and projected growth in China.
He emphasised that the United Arab Emirates' economy was less vulnerable to the negative impact of low world oil prices due to the fact that oil revenues constitute only 30 percent of the UAE's GDP.
"We have strong financial abilities, sovereign wealth funds (SWFs) and banks having high ratio of liquidity. Our banks have huge reserves to handle bad debts and any possible challenges facing the global economy,'' he underscored.
The apex bank, he added, had made several resolutions and introduced regulations to address risks that stemmed out of real estate investment, a move that has provided stability and control over any expected developments in this sector.
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He noted that risks facing the banking sector would increase in the future as the UAE was bracing to host Expo 2020 in Dubai and undertake mega projects in Abu Dhabi.
"Considering these developments, we should have a vibrant, deep financial market, and laws regarding insolvency and debts," he concluded.
The governors of central banks of the UAE and Oman also agreed to join their forces in the fight against cyber crimes in the financial sector, particularly in the UAE, following the expansion in the smartphone banking applications and enforcement of new legislations aimed at encouraging innovations and ensuring financial stability.
The panellists agreed that the strong dollar was helping oil exporting countries' economies since they were selling in dollars and that it compensated for the sliding oil prices with higher purchasing power. Investments are mainly denominated in dollars. The peg to the dollar was also seen as a positive factor by the UAE side.
The world economy was expected to grow by about 3.5 percent this year which was seen as positive but they pointed out that the growth scene has changed and become more country specific.
The panellists welcomed the US economy's recovery and China's good long-term planning.
They also debated whether it was better to favour rapid growth with the risk of generating bubbles or stability. Regulators said that after the global financial crisis, they started to be more strict in implementing regulations. The panellists said central banks can provide a platform for stability but that it was not in their power to provide growth.
They also agreed that cyber-crime is one of the big risks to beware of today.
The UAE is home to around two million expatriate Indians and the country is a major source of remittances for India.
--IANS/WAM
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