MENA Newswire News Desk: The Central Bank of the UAE has reported an increase in the money supply aggregate M1, which grew by 0.6% to reach AED889.3 billion by the end of July 2024, up from AED884.1 billion at the end of June. This growth was attributed to a rise of AED0.2 billion in currency circulating outside banks and a significant AED5.0 billion increase in monetary deposits.
Additionally, the money supply aggregate M2, which includes M1 as well as quasi-monetary deposits, saw a 1.7% rise, reaching AED2,205.9 billion at the close of July. The primary drivers for this growth were the increases in M1 and a substantial AED31.3 billion expansion in quasi-monetary deposits, reflecting an ongoing rise in liquidity within the UAE’s financial system.
Similarly, the broader money supply aggregate M3, which includes M2 along with government deposits, also expanded by 1.7%, increasing from AED2,632.0 billion in June to AED2,676.0 billion in July. This rise in M3 was largely influenced by growth in M2 and an additional AED7.5 billion increase in government deposits, signaling strengthened government participation in the banking sector.
Conversely, the UAE’s monetary base experienced a slight decrease of 1.0%, moving from AED725.0 billion in June to AED718.1 billion in July. This contraction was driven by a 0.5% reduction in currency issuance and a notable 12.0% drop in the reserve account, outweighing a 26.6% increase in banks’ and other financial corporations’ current accounts and overnight deposits with the Central Bank. Minor gains were also recorded in monetary bills and Islamic certificates of deposit, which edged up by 0.04%.
Banking sector assets continued to show modest growth, with gross assets, including bankers’ acceptances, rising by 0.9% to AED4,348.6 billion at the end of July, compared to AED4,310.2 billion in June. Within this sector, gross credit saw a slight increase of 0.1%, reaching AED2,102.1 billion, largely due to a 0.3% rise in domestic credit. This domestic credit expansion was led by increases in lending to the government and private sectors by 1.2% and 0.7%, respectively, which more than offset decreases in credit extended to public sector entities and non-banking financial institutions by 1.9% and 1.2%, respectively.
Total bank deposits also experienced an uptick of 1.6%, rising to AED2,736.0 billion by the end of July, driven by a combination of resident and non-resident deposit growth. Resident deposits grew by 1.5%, bolstered by increases in government sector deposits (0.6%), deposits from government-related entities (10.6%), and private sector deposits (0.6%). Non-resident deposits contributed to this growth with a 2.4% rise, even as deposits from non-banking financial institutions declined by 1.0%.
This comprehensive financial data reflects a continued strengthening of the UAE banking sector, with steady increases in various deposit categories and a stable expansion in credit and asset holdings, despite slight adjustments in the monetary base. The Central Bank’s report underscores ongoing confidence and activity across both government and private financial sectors.