Bond law to boost economy

The Federal National Council (FNC) yesterday passed new legislation regulating the issuance of government debt, in a crucial step towards developing local bond markets and easing the international credit squeeze.

The move comes as regional economies increase spending to stoke economic growth and try to develop their capital markets while oil-fuelled budget surpluses shrink.
“Every government has to borrow, even if it has enough money, so it doesn’t use all of its financial resources in infrastructure projects,” Obaid Humaid al Tayer, the Minister of State for Financial Affairs, said at the Federal National Council yesterday. “The debt is for infrastructure, not salaries.”

The new government bonds will be designed to create a benchmark debt pricing system, against which other local borrowers such as large companies will then be able to issue their own bonds, giving them access to new sources of capital.
“The goal behind this law is to create a bonds market, where bonds can be issued for five, 10 or 30 years, as is the case in developed countries,” Mr al Tayer said.