Understanding Federal Decree Law No (9) of 2018 on Public Debt in the United Arab Emirates
The Federal Decree Law No (9) of 2018, issued by the President of the United Arab Emirates, Khalifa Bin Zayed Al Nahyan, establishes the legal framework governing the issuance and management of public debt within the country. This law aims to promote fiscal stability, support economic development, and ensure transparent management of government and local government borrowing activities across the UAE.
Scope and Objectives of the Law
This law applies to all forms of public debt owed by the federal government and local emirate governments, whether denominated in UAE Dirhams or foreign currencies. Its primary objectives include regulating the issuance of debt instruments, managing outstanding obligations prudently, and supporting the development of financial markets in the UAE.
Key aims of the law are to:
- Establish a clear legal framework for public debt management.
- Support infrastructure and development projects through debt issuance.
- Enhance the efficiency and transparency of the financial markets.
- Ensure fiscal sustainability and risk mitigation in debt management.
Definitions and Key Terms
The law provides precise definitions to clarify its scope and application:
- Public Debt: The total of all outstanding obligations owed by the federal or local governments, whether direct or indirect, denominated in local or foreign currencies.
- Public Debt Instrument: Any debt security issued by the government or local authorities, including treasury bonds, promissory notes, treasury bills, and Islamic financial instruments, which commits the issuer to repay a specified amount.
- Outstanding Public Debt: The total amount of debt that remains unpaid at any given time.
- Public Debt Surplus: The remaining value of issued debt instruments that have not been committed or used for specific purposes.
- Government Own-Stable Revenues: Revenues arising from government services, which fluctuate within a controlled margin of up to 10% based on the last three years’ average.
Legal and Institutional Framework
The law establishes the Public Debt Management Office within the Ministry of Finance, which is directly supervised by the Minister. This office is responsible for:
- Planning and executing debt issuance strategies.
- Monitoring outstanding obligations.
- Ensuring compliance with legal and fiscal policies.
- Maintaining the electronic registry for debt instruments, facilitating transparency and accountability.
The law also emphasizes the importance of adherence to fiscal discipline and risk management policies, ensuring that debt issuance aligns with the country’s economic objectives and fiscal capacity.
Permitted Purposes for Public Debt Issuance
The law specifies various objectives for which the government and local authorities can issue debt, including:
- Financing infrastructure projects and development initiatives approved by the Cabinet.
- Supporting the development and diversification of financial markets within the UAE.
- Refinancing or substituting existing debt to optimize costs and manage risks.
- Supporting monetary policy objectives of the Central Bank.
- Covering financial obligations arising from emergencies or unforeseen circumstances, as approved by the Cabinet.
Implications for Public and Private Stakeholders
This law provides a structured and transparent framework for the issuance and management of public debt, which benefits both government entities and investors. It ensures that debt issuance is conducted responsibly, with clear legal backing, and supports the development of a robust financial market environment.
For citizens and businesses, the law enhances confidence in the UAE’s fiscal policies and promotes economic stability. It also ensures that borrowing activities are aligned with sustainable fiscal practices, thereby safeguarding future generations from undue debt burdens.
Conclusion
Federal Decree Law No (9) of 2018 marks a significant step in strengthening the UAE’s financial governance. By establishing clear rules for public debt management, the law aims to foster economic resilience, enhance fiscal transparency, and support sustainable development across the federation. Stakeholders involved in government financing and financial markets should adhere closely to its provisions to ensure compliance and contribute to the country’s economic stability.
