Ministry of Finance establishes Public Debt Management Unit

The PDMU will be responsible for developing the public debt management and risk management strategies, and submitting it to the Government of United Arab Emirates, in line with its objective of reinforcing the financial position of the State.

Commenting on the establishment of the PDMU as an important and essential step, Nadia Sultan, from the Department of Financial Operations, said:

"The prompt formation of the DMU, following the government's decision to form the Public Debt Management Office (PDMO), indicates the UAE's commitment to facilitate the development of a healthy debt market to provide low cost funding consistent with a prudent degree of risk. We also aim to provide effective public debt management which will strengthen the economy's overall financial efficiency."

The Public Debt Management Unit of the Ministry of Finance will be one component of the three-pronged Public Debt Management Office (PDMO) reporting to the Minister of Finance. As part of its mandate the DMO will set up a clear and realistic debt management strategy with an underlying aim to develop alternative funding or asset management scenarios to match market opportunities and funding needs, simultaneously evaluating cost of funds, asset yield and risk ratios.

The Public Debt Management Unit at the Ministry of Finance will operate as the Middle Office of the PDMO and will be tasked with strategizing and planning of debt/asset management and risk management. The Front Office function, of issuing government securities and executing transactions, and the Back Office function, of clearing, settling and recording of transactions will be both managed by the Central Bank.

"Through sound sovereign debt management, the UAE will be able to develop and maintain an efficient market for Government securities, and a sustainable capital market, which will continue to enhance the country's creditworthiness," added Nadia Sultan.

The DMO, when recommending transactions, will consider multiple funding or asset management alternatives and diversify transactions in terms of currencies, interest rates, maturities and other relevant factors, in synergy with the country's fiscal and monetary policies.

In a bid to move towards a transparent debt management operation the DMO's recommendations on transactions will be transparent and accountable. It will prepare its borrowing plans, issuance calendars of government securities and annual reports on the Debt Management Office's activities, to ensure investors can reasonably anticipate the objectives, goals, size, and dates of maturity of debt.

Not only will the DMO assist in assessing the government's liquidity needs, it will also initiate safe and efficient channels for the distribution of securities such as auctions, syndication, possible use of primary dealers targeted to investor needs and thereby lowering transaction costs. While fund raising would be conducted primarily through auctions and competitive underwritings, private placements may be an option if the circumstances justify.