The United Arab Emirates’ drive to modernise its monetary system, including the rollout of a Digital Dirham and new rules for stablecoins, is improving policy transmission and supporting financial resilience, the International Monetary Fund said at the end of its 2025 Article IV mission.
“Enhancements to the Dirham Monetary Framework, with the introduction of new liquidity management facilities, upgraded forecasting and market monitoring techniques are welcome and are helping improve liquidity management and reduce the spread between the DONIA and the Base Rate to further strengthen monetary policy transmission,” the IMF staff team led by Said Bakhache said.
The Fund linked the monetary upgrades to an economy that is set to expand faster than regional and global averages. “The UAE has shown strong resilience to global uncertainty, regional conflicts, and oil market volatility,” the statement said. “Supported by sustained diversification and expanding exports, the UAE is projected to grow strongly, well above the global average in 2025.”
The mission added, “Following an estimated 4.0 percent growth in 2024, GDP is projected to expand by 4.8 percent in 2025, driven by robust non-hydrocarbon growth and a rebound in hydrocarbon output as OPEC+ production increases, accelerating further to 5.0 percent in 2026.”
Inflation “is projected at 1.6 percent in 2025 and around 2 percent over the medium term,” the IMF said, noting that “housing costs are expected to be the main source of price pressures, raising potential affordability concerns, while tradables remain subdued.” Risks are “broadly balanced,” underpinned by “strong sovereign buffers and diversification efforts.”
The external position improved in 2024. “The current account balance strengthened further in 2024, driven by higher goods and services exports, especially non-hydrocarbon exports, and slower growth in imports,” the IMF said.
The UAE is “expected to remain resilient to global policy uncertainty,” with efforts to expand Comprehensive Economic Partnership Agreements seen as supportive of diversification.
On fiscal policy the Fund said, “The UAE’s fiscal stance remains prudent. Fiscal policy is anchored in medium-term diversification and developmental objectives, with ample sovereign buffers to cushion against adverse shocks.” It expects “the non-hydrocarbon primary deficit” to improve gradually, “supported by the implementation of the corporate income tax and other indirect tax reforms.” The IMF added that “a wider scope for fiscal policy coordination between the federal and local governments would enhance consistency and lead to more effective policy making.”
The financial system is described as robust. “The UAE’s financial sector remains strong and sound, supported by strong capital and liquidity buffers, improved asset quality, and conservative macroprudential policies,” the statement said.
“Banks remain profitable, with capital and liquidity ratios well above regulatory minimums and declining non-performing loan ratios,” while “double-digit deposit growth has strengthened funding and lowered the loan-to-deposit ratio.” Conservative limits and “the introduction of a countercyclical capital buffer” are “helping mitigate risks,” and “the new Financial Stability Council provides a valuable forum for national risk analysis.”
The IMF said “real estate activity remains buoyant,” aided by demand, reforms, and population growth, and noted that “banks’ exposure to the sector has gradually declined to about 18 percent of risk-weighted assets, while most transactions are self-financed,” which limits systemic risk. Even so, “continued vigilance is warranted,” including careful assessment of “potential risks from real estate tokenization.”
On digital assets, the UAE’s role as “a global hub for virtual assets should be supported by continued strong coordination among regulators.” The Fund “welcomes the major efforts under the National AML/CFT Strategy and Action plan that resulted in the recent removal of the UAE from enhanced monitoring under the Financial Action Task Force and encourage continued progress.”
Broader reforms are seen lifting medium-term growth. “The government’s reform agenda continues to strengthen diversification and medium-term growth through investments in technology, infrastructure, and services,” the IMF said, adding that climate adaptation, water management, and food security “should also remain long-term policy priorities.” It also “welcomes continued efforts, including by the federal Cybersecurity Authority, to address” challenges from the UAE’s rise as a global AI hub.
Data upgrades earned praise. “Staff welcomes the authorities’ strong efforts and significant progress on improving the compilation of BOP data and the GDP data, alongside continued improvements in the timeliness of fiscal data,” the statement said. The mission closed by thanking counterparts for “open and fruitful discussions.”