ABU DHABI, The letters of guarantee issued by banks and other business entities in the UAE amounted to AED12.7 bn during the first nine months of 2018, a growth of 15 percent 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 AED500 mn to AED97.3 bn from AED96.8 bn 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.
According to CBUAE statistics, Q1 of 2018 saw UAE banks issuing letters of guarantee worth AED1.7 bn, with Q2 witnessing AED9.5 bn worth of guarantees, bringing their total value to AED95.8 bn.
During Q3, their value declined from AED97.8 bn to AED96.8 bn in August before increasing to AED97.3 bn after a number of individuals and institutions fulfilled their financial commitments.
The International Monetary Fund (IMF) has projected 2.9 percent non-oil GDP growth for the UAE in 2018, and 3.9 percent by 2019, driven by higher government spending and rising oil revenues.
Source: Emirates News Agency