DUBAI (Reuters) – The United Arab Emirates will start injecting 20-25 billion dirhams ($5.45-6.81 billion) into banks in the Gulf Arab state by the end of the week, a newspaper reported on Monday, citing well-informed sources.
“The funds will be injected into the banking system as long-term deposits for two years to enable banks to carry out their roles and enhance the economic activity in the country,” al-Ittihad newspaper reported, citing the unidentified sources.
The funds, part of a government plan announced earlier this month to inject 70 billion dirhams into bank, would be proportionate to bank assets, they said.
“The finance ministry and the central bank of the UAE will start to inject part of the liquidity … 20-25 billion dirhams by the end of this week,” the newspaper said. “The rest would be injected at a later stage that has not been specified (yet).”
The government last week ordered funds to be transferred to the finance ministry to help lenders stave off the effects of the global credit crisis, but it gave no details on how this would happen.
The newspaper said the style of distribution was decided in a meeting that involved officials from the finance ministry, the central banks and the banks’ top executives on Saturday.
Global credit markets have dried up as the West faces its biggest financial crisis since the 1930s Great Depression.
State and private investors in the Gulf Arab region, booming thanks to six years of high oil prices, have been funneling billions of dollars into infrastructure projects which demand massive amounts of continuous credit.
The UAE central bank last month opened a 50 billion dirham emergency facility, with the funds offered at a premium to market rates. UAE interbank interest rates have edged lower since the facilities were announced.
Central banks in the UAE and Saudi Arabia have also guaranteed bank deposits, while Kuwait’s central bank reduced its benchmark discount rate, to boost confidence in banks.