UAE faces a spanner in its monetary works

The conduct of monetary policy is normally an area reserved for wonks. But this week and last, the arcana of the United Arab Emirates money markets has spilled over into the public domain.

In theory, one of the functions of the money markets is to determine a rate, usually fixed by a committee of banks, at which institutions are willing to lend to each other.

But bankers and economists say the UAE’s monetary mechanisms are not working – in spite of low official rates and a Dh50bn ($13.6bn) liquidity support facility made available last September.