Letters of Guarantee worth Dh12.7bn issued in nine months

By Eudore R. Chand

ABU DHABI 22 November 2018: The letters of guarantee issued by banks and other business entities in the UAE amounted to Dh12.7 billion during the first nine months of 2018, a growth of 15 per cent as compared to the end of 2017, according to the Central Bank of the UAE.

In September, the value of the letters of guarantee provided by UAE-based banks to different business sectors increased by Dh500 million to Dh97.3bn from Dh96.8bn in August of the same year.

A letter of guarantee is a type of contract issued by a bank on behalf of a customer who has entered a contract to purchase goods from a supplier. The letter of guarantee lets the supplier know that they will be paid, even if the customer of the bank defaults, said Wam.

According to CBUAE statistics, Q1 of 2018 saw UAE banks issuing letters of guarantee worth Dh1.7bn, with Q2 witnessing Dh9.5bn worth of guarantees, bringing their total value to Dh95.8bn.

During Q3, their value declined from Dh97.8bn to Dh96.8bn in August before increasing to Dh97.3bn after a number of individuals and institutions fulfilled their financial commitments.

The International Monetary Fund (IMF) has projected 2.9 per cent non-oil GDP growth for the UAE in 2018, and 3.9 per cent by 2019, driven by higher government spending and rising oil revenues.

Dubai Gazette