UAE Central Bank Seeks Dollar Swap Deal with US

Khaled Mohamed Balama, governor of the Central Bank of the UAE, is transforming the bank's role in global finance. Unlike his peers at the US Federal Reserve and European Central Bank, he has traditionally followed a technocratic and discreet approach.

The UAE's dollar-dirham peg means that interest rates are set 11,000km away in Washington by the Fed. However, Balama is increasing the bank's international visibility, leading delegations to IMF and World Bank meetings and delivering keynote addresses.

In a significant move, he proposed a dollar swap arrangement with the US during meetings in Washington, which was portrayed as an emergency request but was actually about establishing a closer relationship with the Fed. The UAE has become one of the world's biggest pools of dollar wealth and wants to secure a seat near the head of the table.

The CBUAE's base rate is anchored to the interest the Fed pays on reserve balances, while the peg is maintained by buying and selling dollars against dirhams at fixed rates. The US faces inflationary pressure due to the Iran war, but the UAE faces a recessionary impact on trade and tourism.