The Cabinet
Cabinet Resolution No. (69) of 2023
Concerning the Regulation of Issuing Government Guarantees
The Cabinet:
— Having reviewed the Constitution,
— And Federal Law No. (1) of 1972 concerning the competencies of Ministries and the powers of Ministers, and its amendments,
— And Federal Decree-Law No. (9) of 2018 concerning Public Debt, and its amendments,
— And Federal Decree-Law No. (15) of 2018 concerning the collection of public revenues and funds,
— And Federal Decree-Law No. (26) of 2019 concerning Public Finance, and its amendments,
— And based on the proposal of the Minister of Finance and the approval of the Cabinet,
Has decided:
Article (1)
Definitions
For the purposes of implementing the provisions of this Resolution, the following words and phrases shall have the meanings assigned to each of them, unless the context otherwise requires:
| State: |
The United Arab Emirates. |
| Government: |
The Federal Government of the State. |
| Minister: |
The Minister of Finance. |
| Ministry: |
The Ministry of Finance. |
| Federal Government Entity: |
Any of the federal government entities specified in Federal Decree-Law No. (9) of 2018 concerning Public Debt and its amendments, and Federal Decree-Law No. (26) of 2019 concerning Public Finance and its amendments. |
| Public Debt: |
The direct and indirect obligations denominated in UAE Dirham or any foreign currencies, which are outstanding and owed by the Government, in accordance with the provisions of Federal Decree-Law No. (9) of 2018 concerning Public Debt and its amendments. |
| Government Guarantee: |
A written undertaking issued by the Minister on behalf of the Government, in accordance with the provisions of this Resolution, by which the Government commits to fulfilling the obligations specified therein. |
| Outstanding Government Guarantee: |
The total outstanding obligations at any time, which are owed by the Government under one or more government guarantees. |
Article (2)
Objectives of the Resolution
This Resolution aims to establish the general rules and conditions that regulate the issuance and management of Government Guarantees.
Article (3)
Authority Competent to Issue Government Guarantees
- The Cabinet, upon the recommendation of the Minister, may issue a resolution approving the granting of a Government Guarantee.
- The Minister shall issue the Government Guarantee in accordance with the conditions stipulated in the Cabinet's approval resolution for granting the Government Guarantee, and in accordance with the provisions of this Resolution.
Article (4)
Entities that Can Obtain a Government Guarantee
The Government Guarantee shall be issued on behalf of:
- Any Federal Government Entity.
- Any Federal Government Entity in its capacity as a shareholder/partner in another entity, taking into account the provisions of Clause (3) of Article (9) of this Resolution.
- Any other entity designated by a federal law or in accordance with the provisions of a federal law.
Article (5)
Purposes of Issuing a Government Guarantee
A Government Guarantee is issued to achieve any of the following purposes:
- To support and assist the financing of infrastructure projects, development projects, and projects of economic or social value that are implemented, supervised, or contributed to, directly or indirectly, by the Government or any Federal Government Entity.
- To reduce the cost of establishing, managing, or operating projects adopted by the Government.
- To improve the feasibility of projects or activities adopted by the Government.
- To meet requirements in cases where a Government Guarantee is a prerequisite for obtaining loans from banks and financial institutions, or from export credit agencies, or for public-private partnership projects, in accordance with the legislation governing these cases.
- To contribute to increasing the productivity of facilities that provide public services and improving the quality of these services, while monitoring their financial performance and ensuring their effective management.
- To implement projects that add economic value to production or service facilities.
- To reduce the burden on the general budget represented by cash balances for project implementation.
- Any other purposes approved by the Cabinet upon the recommendation of the Minister.
Article (6)
Controls for Issuing a Government Guarantee
The Government Guarantee shall be issued in accordance with the following controls:
- The Government Guarantee must aim to achieve any of the purposes specified in Article (5) of this Resolution.
- The Government Guarantee must be consistent with the government guarantee management policy as part of the public debt, in accordance with sound and safe best practices.
- Adopting a high level of transparency and reliability to achieve the purposes for which the Government Guarantee is issued.
- Maintaining a balanced risk level in the public debt portfolio.
- Meeting the financial needs of projects adopted by the Government according to the principles and criteria of risk management associated with the issuance of each Government Guarantee separately.
- The credit rating of the entity in which the Federal Government Entity is a shareholder or partner must be high, or the project for which the Government Guarantee is issued must have economic feasibility that qualifies it for borrowing.
- Classifying default ratings to determine the risk of failing to meet any of the obligations contained in the Government Guarantee.
- Any other controls issued by a resolution from the Minister.
Article (7)
Public Debt Ceiling Resulting from Government Guarantees
The total financial amounts guaranteed by outstanding government guarantees, when added to the Government's existing public debt, shall not exceed the percentage specified for public debt in the applicable laws and regulations.
Article (8)
Ceilings for Specific Types of Government Guarantees
Without prejudice to Article (7) of this Resolution, the ceilings of the following outstanding government guarantees shall not exceed the percentage specified for each:
- The Government Guarantee issued to guarantee the financing of capital projects fully owned by the Government at a rate of (80%) of the value of each project.
- The Government Guarantee issued to guarantee any of the financial obligations of a Federal Government Entity in energy or water production and distribution projects or any other projects approved by the Cabinet upon the recommendation of the Minister at a rate of (100%) of the value of the obligation.
- The Government Guarantee issued to a Federal Government Entity in its capacity as a partner or shareholder in another entity in accordance with the provisions of paragraph (d) of Clause (3) of Article (9) of this Resolution.
Article (9)
Requirements and Procedures for Requesting the Issuance of a Government Guarantee
- The Federal Government Entity wishing to issue a Government Guarantee shall submit an application to the Ministry - according to the forms approved by the Ministry - fulfilling all the requirements for issuing the Government Guarantee mentioned below, and any other requirements that the Ministry may request.
- The Federal Government Entity must clearly specify the type, value, and duration of the Government Guarantee, its ability to meet the obligations contained in the Government Guarantee, and the alternative plans to meet them in the event of any contingency that leads to a temporary or permanent cessation of fulfilling any of these obligations.
- If the Government Guarantee requested to be issued includes a commitment to guarantee the repayment of cash amounts, the application must be accompanied by a written undertaking from the Federal Government Entity on whose behalf the Government Guarantee is issued to include in each of its fiscal years the necessary financial appropriations to cover its financial obligations listed in the Government Guarantee, and in the relevant fiscal year if the fulfillment of the obligation is a one-time event.
- If the Government Guarantee requested to be issued is on behalf of the Federal Government Entity in its capacity as a shareholder/partner in another entity, the application must be accompanied by evidence confirming the fulfillment of the following conditions:
a. A collective decision from all partners or shareholders in the entity where the Federal Government Entity is a shareholder/partner, committing them to issue one or more financial guarantees to secure the fulfillment of its obligations.
b. A decision from the other shareholders/partners in the entity where the Federal Government Entity is a shareholder/partner, committing each of them to issue a financial guarantee with terms no less favorable than the Government Guarantee requested to be issued on behalf of the Federal Government Entity.
c. The entity in which the Federal Government Entity is a shareholder/partner must provide proof that the other shareholders/partners have issued their financial guarantees according to their respective contributions or shares in the paid-up capital of that entity.
d. The Government Guarantee requested to be issued must be within the limit of the Federal Government Entity's contribution or share in the paid-up capital of that entity.
- The Ministry shall conduct a thorough review of the application and the documents submitted to it, and shall assess the compliance of the application and documents with the requirements for issuing the Government Guarantee. It may request any necessary documents from the applicant entity. Then, if the application complies with the requirements, the Ministry shall submit the application to the Cabinet, including its recommendations, along with a report from the Ministry confirming that the requested Government Guarantee complies with the controls stipulated in this Resolution, and any other necessary attachments for deciding on the application.
- The Cabinet shall consider the application after it is submitted to it according to the form approved by the General Secretariat of the Cabinet. The General Secretariat of the Cabinet shall notify the Ministry of the Cabinet's decision. In case of the Cabinet's approval, the Ministry shall complete the necessary procedures to issue the Government Guarantee.
Article (10)
Registration, Preservation, and Destruction of Government Guarantee Documents
The Ministry shall establish a system for registering, preserving, and destroying all financial and administrative documents, correspondence, and records related to each Government Guarantee, taking into account the provisions stipulated in Federal Decree-Law No. (9) of 2018 concerning Public Debt and its amendments, and Federal Decree-Law No. (26) of 2019 concerning Public Finance and its amendments.
Article (11)
Procedures for Recovering Funds Paid to Execute a Government Guarantee
- The dues specified in the resolution to issue the Government Guarantee shall be considered an obligation on the Government and shall be paid from its resources, in accordance with the terms and conditions specified in the same resolution.
- Without prejudice to the provisions of Federal Decree-Law No. (15) of 2018 concerning the collection of public revenues and funds, and Federal Decree-Law No. (26) of 2019 concerning Public Finance and its amendments, the Ministry shall take all necessary administrative, legal, and judicial measures and procedures to ensure the recovery of any funds paid by the Government in fulfillment of its obligations under the Government Guarantee.
Article (12)
Exemption from Repayment
The Cabinet may, upon the recommendation of the Minister, exempt the Federal Government Entity on whose behalf the Government Guarantee was issued from all or part of the funds paid by the Government in fulfillment of its obligations under the Government Guarantee.
Article (13)
Control and Auditing
- The Ministry shall undertake the control and auditing of the performance and management of the Government Guarantee, from its issuance until the termination of the obligations specified therein, including ensuring that the entity on whose behalf the Government Guarantee was issued has fully carried out all actions and taken all necessary precautions to comply with the terms of the Government Guarantee's issuance.
- The Federal Government Entity on whose behalf the Government Guarantee is issued shall notify the Ministry of any events, cases, or circumstances that may lead to a breach in the fulfillment of any of its obligations under the Government Guarantee, and of the procedures or measures it recommends to be taken to prevent such a breach.
Article (14)
Periodic Reports and Notifications
- The Federal Government Entity on whose behalf the Government Guarantee is issued shall submit all data, information, and documents requested by the Ministry, whether related to the issuance of the Government Guarantee, its performance, or the extent of the Federal Government Entity's fulfillment of any of the obligations contained in the Government Guarantee, and its full execution of all actions and taking all necessary precautions to comply with the conditions specified in the Government Guarantee.
- The Federal Government Entity on whose behalf the Government Guarantee is issued shall submit monthly or periodic reports to the Ministry on the performance of the debts associated with the Government Guarantee issued to it.
Article (15)
Annual Report on Government Guarantees
- The Minister shall submit an annual report to the Cabinet on the Government Guarantees issued during the past fiscal year, within the first three months of the following fiscal year.
- The report must include the following:
a. The value of each outstanding Government Guarantee or its outstanding balance and the reasons for its issuance.
b. In the event of a failure by the Federal Government Entity or the entity in which the Federal Government Entity is a shareholder/partner and for which the Government Guarantee was issued to fulfill all or some of the obligations contained in the Government Guarantee, an assessment of the degree of this failure, with a statement of the Ministry's views on providing the necessary financial coverage to fulfill the Government Guarantee.
Article (16)
Executive Resolutions
The Minister shall issue the necessary resolutions to implement this Resolution.
Article (17)
Publication and Entry into Force
This Resolution shall be published in the Official Gazette and shall enter into force on the day following the date of its publication.
Mohammed bin Rashid Al Maktoum
Prime Minister
Issued by us:
On: 22 /Dhu al-Hijjah/ 1444 H
Corresponding to: 10 /July/ 2023 AD