UAE: An Article In Gulf News, Emirates Group Chairman & ENBD CEO Hint That UAE May Finally Need To Depeg It's Currency From The USD, 5 Star Grand Hyatt Hotel Shuts Down In Abu Dhabi, Saudi & Abu Dhabi Both Raising A Lot of Debt As They Run Short On Cash

We have predicted since 2015 and debated it many a times that UAE (and Saudi) do not have a choice but need to depeg or repeg their currencies during or after 2018.

Many economists, media commentators, businessmen and others have debated with us that it can not happen. 

But we have remained stedfast in our views because we know how bankrupt both UAE and Saudi have become after the longest, continuous and most sustained decline in the price of oil since 2014, in history.

Trump came to Saudi that resulted in the arrest of thousands of royal family members in Saudi and curtailment of their powers and taking away almost all their wealth.

Now, for the very first time, a media article has appeared on 30 Mar 2019 on a quiet Saturday afternoon in Gulf News which is a Govt mouthpiece targeted in particular to the expats suggesting that UAE may need to depeg their currency, the dirham, from the USD.

You have to know that absolutely NOTHING can be published in the media in Dubai without the express consent of the Dubai ruling family and since the last few years by the Abu Dhabi ruling family.

Therefore, this article is SHOCKING!

"The main fix is unpegging the dirham from the dollar, which will introduce autonomy in managing and calibrating the UAE’s monetary policy."

This is what we have been suggesting since 2015, however, no one has listened to us until now and we had predicted that UAE and Saudi have 2 choices: to go bankrupt or depeg.

"To soften the blow towards a one-day floating dirham, the UAE could start with a basket of currencies linked to its top non-oil trade partners."

While they may choose to link to a basket of non oil trade partners' currencies, but we believe that this is not appropriate because besides oil there is nothing much going on in the GCC.

The population of UAE, for example is 8-9 million, out of which 6-7 million are low end workers like laborers, maids, drivers, sales boys and girls, clerical workers etc. 

The remainder 1-2 million in UAE is so small that a suburb in Shanghai or New Delhi or Manila has more people living in it than in the entire UAE plus the incomes and spending power of these people has shrunk dramatically in the last few years.

Hence, their consumption is too tiny to be linked to other nations with whom they do non-oil trade. 

They should link to the currency of China who they aim to have as their biggest oil buyer plus is their largest non oil trade partner and also has excess money to invest into these economies plus has the capacity to support them with their military (which is exactly what the deal with USA was for over 40 years, all combined).

Here is the article:

30 Mar 2019: It’s time the dirham moved on from the dollar peg

In addition, 2 weeks ago, the CEO of ENBD, a bank defacto owned by Dubai ruling family also said the same thing that we have argued for years:

12 Mar 2019: Strong dollar hurting UAE competitiveness, says Emirates NBD chief

Taken together, it means that the days of peg of UAE dirham with US dollar are numbered and the countdown has started.

We believe this is a message being sent to locals and GCC nationals to get ready.

Expats cannot do much except watch their real estate and all assets like deposits, shares etc fall in value when the depeg or repeg occurs in relation to the US dollar.

But no one can blame us that we did not warn them since 2015 and we are almost there in terms of moving away from the USD or repeg (like Kuwait has already done and tied it to a basket of currencies since June 2007).

Such news by ENBD CEO and by an economist in the UAE is simply not allowed to be published if anyone knows anything about the UAE.

The fact that they have made it public is because they have perhaps decided that it is best to warn the public instead of springing a surprise on everyone when everything is in shut down mode anyways.

Either way, we believe that the depeg may be quite near.

Businesses continue to plunge and shut down and very rarely they get mentioned in the news. 

No data is being disclosed on number of residency visas, Etisalat/Du telecom users, number of electricity and water connections etc for a few years now.

Another 5 star hotel owned by the Sheikhs of Abu Dhabi just shut down.

It closed in less than 9 months! 

Just like the 4 top notch 5 star hotels in Dubai owned by Al Habtoor that collapsed last year within a year or so of opening, now are managed by Habtoors themselves and some were taken over by Hilton.

"Five-star hotel on the Corniche opened in June last year"

28 Mar 2019: Grand Hyatt Abu Dhabi closure due to issues “beyond control”

Just like the iconic Chrysler building was sold by Abu Dhabi a few weeks ago at a loss of 90% approx, now they are looking to sell another multi billion dollar business in Canada to raise cash. Most likely this will result in a loss as well.

28 Mar 2019: Abu Dhabi Weighs Options for $10 Billion Nova Business

Same is the dire situation in Saudi Arabia due to their peg to the dollar.

Touted as the richest company in the world, valued at ridiculous valuation of USD 2 trillion, then one wonders why they need to raise billions in cash unless they are in dire straits?

They have a USD 2,000,000,000,000 valuation but don't have USD 10,000,000,000 cash or in assets?

This is like a businessman who claims he is worth USD 2,000,000 but doesn't have USD 10,000 in his company account!! :)

28 Mar 2019: Saudi Aramco mulls $10 billion bond issuance

Now, let's look at the statements made by the UAE.

This is around the first time in 2015 when we predicted that during/after 2018 UAE will need to depeg. But the Governor of UAE Central Bank disagreed with us.

2 Mar 2015: UAE has no plan to de-peg dirham from US dollar: Governor of Central Bank

In 2016, they reiterated the same story.

5 June 2016: U.A.E. Says Dollar Peg Here to Stay as Devaluation Bets Climb

Again in 2018, they repeated the same thing:

30 Jan 2018: Governor says UAE will keep dirham tied to US dollar

Same was the case in Saudi.

One commentator said the same thing:

Jan 2016: Saudi will not de-peg or devalue riyal

27 Jan 2016: Big money is betting against Saudi Arabia

The situation in Saudi has remained grim for the 6th year and it has now turned into a budget deficit nation, thanks to their lower oil income and higher expenses since 2014.

18 Dec 2018: Saudi announces budget deficit for sixth straight year

And finally, just to show you how bad things are in Dubai, there are several videos on YouTube showing abandoned cars in Sharjah, Abu Dhabi, Dubai etc.

Here is the latest one:

25 Mar 2019: ABANDONED HYPERCARS IN DUBAI (FERRARI,LAMBORGHINI,ROLLS ROYCE'S,BENTLEY,GTR ETC)

Meanwhile, the noise around bleeding Etihad to merge with Emirates is growing.

"Cutting costs is only half the battle. Etihad is also struggling to maintain passenger numbers at a time when traffic continues to grow.

It carried more than a million passengers fewer in 2018 than a year earlier. That hurt its load factor, which measures how many seats are filled on each flight."

22 Mar 2019: Etihad is still bleeding money. Is it time to merge with Emirates?

Just last week, Chairman and CEO of Emirates also said:

"The toughening trading conditions have led to the airline embarking on an efficiency drive through the implementation of new technology and business processes that have been accompanied by a reduction in employees to about 101,983 in September 2018, down about 1 per cent on the previous six months."

"But it was the decision in February 2019 to cut its remaining order for Airbus A380 superjumbo aircraft from 60 to 14 and discontinue deliveries of the A380 beyond 2021 that has made the biggest headlines."

"The Emirates chairman says there are many different factors putting pressure on airlines’ profitability. “Fuel prices are always a big factor in the aviation industry,” he says. “Currency is also a major factor in the profitability of airlines, or fuel and currency.”"

We agree with him. 

Because whatever money Emirates earns abroad besides AED and USD, for example in Africa, Asia, India, China, Europe etc must be converted into AED/USD and it results in lower AED/USD and makes them incur losses.

All this can reduce if they were to depreciate or repeg their currency to the Chinese Yuan or a basket or even repeg it.

This potentially is the third hint within the month of March 2019 alone.

24 Mar 2019: Emirates CEO focuses on efficiency  

No doubt, more efficiency and making UAE inexpensive by "depreciating" or depegging the currency, just like every single nation in the world, must be on their minds, if they need to survive, which is why an economist and a bank CEO as well Emirates Group Chairman have been asked to send out a big hint in the open.

Let us see how this unfolds.

Our best wishes are with everyone who is playing this lotto.