The IMF said it welcomes the UAE’s imminent plans to ratify a bankruptcy law as a measure that will help to give a much-needed boost to non-oil economic growth.
The law, a draft of which was recently approved by the Cabinet, is awaiting a final stamp of approval from lawmakers or a presidential decree. Once in place, it will help business owners facing financial difficulties to reschedule debt without facing jail time.
“This has been on the cards for a long time,” said Masood Ahmed, regional head of the IMF. “The fact that they’ve done this is a plus in my mind.”
The lack of insolvency regulations during Dubai’s credit crisis between 2009 and 2010 led to a number of businessmen being detained for unpaid debts, with many fleeing the country to avoid arrest.
That scenario has been replaying itself on a much smaller scale over the past two years as small businesses face difficulty in repaying debt amid the collapse of oil prices and the subsequent fall in government spending.
Abdul Aziz Al Ghurair, the chief executive of Mashreq and head of the UAE Banks Federation, said in November that some small business owners had skipped town, leaving about Dh5 billion of unsettled loans.
As well as protecting financially strapped businessmen from criminal prosecution except in cases of fraud, the law is also expected to encourage more people to try out their entrepreneurial skills.
Non-oil GDP growth in the UAE is expected to slow to 2.4 per cent this year from 3.7 per cent last year and may accelerate to 2.7 per cent in 2017, according to IMF figures.
mkassem@thenational.ae
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