UAE finance ministry injects Dh25bn into banks

The Government injected Dh25 billion into banks in an effort to rejuvenate lending and alleviate the global liquidity crisis.

The Government delivered Dh25 billion (US$6.81bn) into the banking system today to revive lending and alleviate the pain from the global liquidity crisis. The Ministry of Finance said in a statement that a condition of the funds injection was that the money be used to support lending to business and basic infrastructure developers. "Among these requirements, the banks shall finance trade-related facilities and give loans to businessmen and basic infrastructure developers," the ministry said. Nasser Saidi, the chief economist at Dubai International Financial Centre Authority, said that the Government was trying to support the construction and completion of infrastructure projects because they helped diversify the economy and were crucial for other industries to grow. "It's sending a signal that development plans are on track and should remain on track, and therefore the construction sector, which is one of the more important sectors in the UAE, particularly at this stage, has commitment and support from the Government," Mr Saidi said. "It's linked to the overall health of the economy and it makes sense for the Government to give it priority." Today's Dh25bn is the first of the Dh70bn that the Government said earlier in the month was earmarked to help facilitate interbank lending, which has come to a halt because international banks have all but stopped transactions with one another during the global financial crisis. "[This money] is designed to support the capital of national banks. The allocations of each bank were determined based on the loans and credit portfolios," the ministry said. [e-mail]