Middle EastWorld

UAE to privatize govt services – Oman to borrow $5-10bn from abroad

DUBAI: DUBAI: The United Arab Emirates plans to outsource most government tasks to the private sector and cut the number of ministries, Prime Minister and Dubai ruler Sheikh Mohammed bin Rashid Al-Maktoum said yesterday. The announcement comes as energy-rich Gulf Arab states have been hit by low oil prices, encouraging them to streamline institutions and attract more foreign investment.

“We will have a road map to outsource most government services to the private sector … The new government will have a smaller number of ministries and more ministers to deal with national and strategic issues,” the prime minister said on his official Twitter account. He announced the formation of a single education ministry, abolishing the ministry of higher education, and fused several other state bodies into related ministries. No time frame was given for the changes. Gulf Arab oil exporters have for years subsidized food, fuel, electricity and water, keeping prices very low in an effort to maintain social order, though the UAE economy is less reliant than some of its neighbors on oil revenues.

Separately, Oman plans to borrow between $5 billion and $10 billion from abroad to help finance a budget deficit caused by low oil prices, central bank executive president Hamood Sangour Al-Zadjali told Al Arabiya television yesterday. Zadjali said the government might issue eurobonds by the middle of this year, but did not comment on the size of any eurobond offer or give further details of the foreign borrowing plan.

He also said the government planned to issue 600 million rials ($1.56 billion) of domestic bonds this year, or about 100 million rials every two months. It is currently marketing a 100 million rial, five-year issue with a coupon of 3.5 percent; the bonds will be auctioned on Feb 16. The borrowing plans underline the heavy financial pressure which Oman faces because of cheap oil; the government has not issued an international bond since 1997. Last month, Oman obtained a $1 billion sovereign loan from international banks.

Financial Affairs Minister Darwish Al-Balushi said in January that the government planned to cut its budget deficit to 3.3 billion rials this year from an actual 4.5 billion rials last year, partly through big spending cuts. The government has decided to borrow abroad to reduce pressure on the local banking system, where money market rates have been rising as inflows of new oil revenues decrease. A central bank auction of 91-day Treasury bills in late January fetched a weighted average yield of 0.844 percent, up from 0.201 percent at a similar sale in March last year.

Arabiya quoted Zadjali as saying the central bank’s foreign reserves were sufficient to cover about four months of imports. Its foreign assets and gold totalled 7.09 billion rials in November, up 8.3 percent from a year earlier, the latest official data shows. In addition, Omani sovereign wealth funds are believed to have about $20 billion of assets, much of them held overseas, which could be sold to obtain foreign exchange if needed. – Agencies

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