(MENAFN- Khaleej Times) The UAE economy is greatly benefitting from a strong US dollar, says Mubarak Rashed Al Mansoori, the governor of the Central Bank of the UAE.
"I think it's very interesting time... we, in the UAE, have been fortunate that our currency is linked to the US dollar," Al Mansoori said while participating in a panel discussion on the "Regulators' Perspective" at the two-day Global Market Financial Forum organised by the National Bank of Abu Dhabi.
The UAE sells its oil in US dollars, while it imports in the same currency, "so a strong dollar helps", he said.
He said the UAE has no intention to de-peg the dirham from the 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."
Sharing his views on the current global economic situation, Al Mansoori said it was really interesting and puzzling at the same time, as the US was on a very nice recovery path; there was expectation for interest rates to go up that has strengthened the greenback.
"I think we have benefitted a lot from the linkage to the US currency... and we don't have any intention to really think about doing anything because that is a very important link that provides stability to our economy and also difficult part is that our investments are in dollar-dominated instruments," he said.
He emphasised that the UAE economy is less vulnerable to the negative impact of low world oil prices due to the fact that the oil revenues constitute 30 per cent of the UAE's GDP.
"We have strong financial abilities, sovereign wealth funds 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.
On the lower yields, he said he was surprised to see that the financial portfolio of the central bank had low returns, but this is how it is as the central bank is responsible for the financial stability of its liquid assets, "so there is a fee we're paying, which is low returns".
Responding to a question over a strong currency as an exporter of goods and services, which means strong competition of its products in overseas markets, the governor said:"I don't see it as a concern because we are an import economy."
The governor said that the UAE has made tremendous strides in introducing micro-prudential regulations post the financial crisis period in order to provide greater financial stability to stamp speculations and bubbles.
The regulations have been issued on terms of real estate, loan-to-value ratio, debt burden, limit to personal loans, an individual can borrow and even government-related enterprises have been brought under strict regulations.
"All of these give you that stability and control," Al Mansoori said.
The governor said that the central bank, in order to boost economic growth in the country, is pushing for lending to SMEs, which is not very encouraging at the moment.
Also, the central bank is trying to improve efficiency of the services provided by banks and financial institutions in terms of cost. "I want to really make sure that the banks have a very good coverage of all segments... I want to make sure services are provided in a cost-effective way," Al Mansoori said.
The governor revealed the central bank is working on a project to reviewing digital-payments regulations in the light of the directions of the UAE leadership, who want to make available every government service on mobile phones and to boost M-payments. So very soon every payment could be made via mobile phones, he said.
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