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UAE's forex reserves to reach $29b

DUBAI — The UAE Central Bank's foreign exchange reserves are poised to record the steepest increase in the GCC at 17.5 per cent this year to $24.8 billion from $21.1 billion in 2005, according to the International Monetary Fund.

The gross official reserves of the UAE, the second largest in the GCC after Saudi Arabia, are projected to surge further in 2007 by 16.9 per cent to $29 billion, underscoring the country's sustained economic buoyancy and growing current account surplus fuelled by the oil revenue.

With the dirham pegged to the dollar, UAE Central Bank's foreign exchange reserves are held entirely in dollars. Recently, the Central Bank Governor Sultan Nasser Al Suweidi said reserve diversification was still on the agenda of the bank, which is looking to convert five per cent of its holdings into euros.

According to IMF's Regional Economic Outlook for the Middle East and Central Asia, while foreign reserves of Saudi Arabia will grow eight per cent to $165.5 billion this year from $153.2 billion, Kuwait's reserves will increase to $11.8 billion from $9.5 billion a year ago. Qatar Central bank reserves will grow to $5.5 billion from $4.6 billion, Oman's from $4.4 billion to $7.1 billion while Bahrain's reserves will remain unchanged at $1.9 billion. IMF report said while Saudi reserves are projected to swell to $224.8 billion next year, other Gulf countries are expected to record modest increases in their reserves.

It said Middle East and Central Asia region's gross official reserves — which include only the amounts held by central banks and do not include foreign assets of governments held in special funds — will rise 20 per cent, from $453 billion in 2005 to $566 billion this year.

"These increases reflect a sharp improvement in current account positions in some countries, and higher foreign investments and other capital inflows in other countries," IMF said. The report noted that the combined gross official reserves of the region's countries have more than doubled since 2002. "All country groupings registered increases in reserves, with those of oil exporters up by about $300 billion since end-2002.

The report said the combined reserves of the 15 oil exporting countries in the region will rise to $476.9 billion this year from $375.4 billion in 2005. In 2007, these reserves are poised to surge to $629 billion, it added.

The report said with oil prices soaring over the past three years, oil exporters' fiscal position moved to a surplus of about 12.5 per cent of the GDP.