This has been a year of stunning economic and social developments in the UAE, beginning with the introduction of VAT in January. From 10-year visas to the sweeping Dh50 billion stimulus package, and every measure in between, the UAE’s booming post-oil knowledge economy draws closer with every passing month.
The latest major reform, a new public debt law permitting the federal government to issue sovereign debt for the first time, is one of the most significant. It will boost growth by facilitating investment in government bonds and strengthening the UAE's bountiful investment landscape.
Historically, the UAE has guarded its national wealth. But the issuance of government bonds is a sign of confidence in the nation’s maturing economy, one of the most dynamic in the Middle East.
The new law – which will be introduced at some point in the near future – offers wide-ranging benefits. It will help enhance competitiveness by creating fresh avenues of financing for the UAE's seven emirates, the federal government and state-owned enterprises, and will give the UAE's banks easier access to funds. It reflects a level of fiscal transparency that is relatively new to the UAE economy. That transparency will significantly boost investor confidence and stand the country in excellent stead when it comes to the management of public finances and integration into the global economy. This will strengthen the UAE's position as a global economic hub.
But there is a deeper point to be made, related to the UAE's smaller emirates. Abu Dhabi and Dubai already sell bonds in international markets, but the less wealthy emirates – including Umm Al Quwain and Ras Al Khaimah – will soon be able to issue their own, allowing them to strategise their long-term economic futures. The northern emirates have traditionally lacked the same level of investment as Abu Dhabi and Dubai, which is reflected in the health and educational outcomes of their residents.
This sovereign debt law will act as an equaliser, putting extra revenue in the hands of their governments. The bonds will allow investors, rather than corporations, to support local government projects, empowering people of the UAE to improve their own communities. This is the nation's cohesive federal system at work.
Overall, the public debt law, which demonstrates great foresight from the UAE’s rulers, will bring substantial returns, both financially and in the daily lives of Emiratis and residents alike.
It has become clear that preparations must be made for life after oil. But rather than approaching that moment with trepidation, the UAE has been remarkably swift in introducing structural reforms, safe in the knowledge that the country’s economic future grows brighter every year.
