AED 12.7 billion worth of letters of bank guarantee within 9 months

Media In Abu Dhabi 20 November 2018 (WAM)
The value of letters of guarantee issued by banks to their customers from institutions and companies operating in the country in all economic sectors increased to AED 12.7 billion during the first ten months of 2018 and a growth of 15% compared to the end of 2017.
The International Monetary Fund forecast the country’s non-oil GDP growth rate of 2.9 percent in 2018, rising to 3.9 percent in 2019, supported by government spending, incentives and expectations of higher oil prices in general.
In September 2008, the value of letters of guarantee provided by the banking sector sector increased by 500 million dirhams, increasing the total balance according to Central Bank statistics to 97.3 billion dirhams compared with 96.8 billion dirhams in August of the same year.
The letter of guarantee is a written obligation of payment, issued by the buyer / importer bank / the so-called issuing bank while the future bank is called the seller’s bank.
Under this letter, the issuing bank ensures that the buyer pays its own currency in respect of the seller in return for the seller supplying the goods agreed upon and under conditions agreed between the parties.
On the quarterly level, the first quarter of 2018 witnessed the issuance of letters of guarantee by the banks operating in the country amounting to 1.7 billion dirhams, while in the second quarter of the same year reached about 9.5 billion dirhams, raising the total balance of 95.8 billion AED.
During the third quarter of this year, individuals and institutions made some commitments to banks, which resulted in a decrease in the total balance of guarantees from 97.8 billion dirhams to 96.8 billion dirhams in August, before the balance returned to rise again in September, amounting to 97.3 billion dirhams.