UAE official keen to address government payment delays

Alamy via Reuters

• Late payments have ‘multiplier effect’
• Senior official presses for change
• Reform is a high priority

A senior UAE official is advocating for policymakers to reassess government payment schedules, citing the strain late payments places on the private sector.

Omar Saif Ghobash, adviser to the UAE Ministry of Foreign Affairs and ambassador to the Holy See, told a panel at the India-UAE Business Forum in Dubai last week that the systemic issue of delayed payments threatens the stability of businesses across the Gulf state.

“There’s [a] problem,” Ghobash said. “A lot of projects here are government-driven… They make huge orders and then they change their mind about whether they want to pay this year or next year.

“That makes a huge difference for the private sector. There will be just a cascade of indebtedness, bankruptcy and skip cases.”

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Ghobash said he is advocating for reform among policymakers, highlighting the need for an overhaul to address the system’s shortcomings.

The diplomat said late payment can have a “multiplier effect” across the private sector as it makes it more difficult for companies to meet their debt obligations.

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Ghobash, who founded a debt collection company in 2000, also expressed concern about the volume of non-performing loans in the private sector.

Non-performing loans are those for which borrowers have not paid back the principal or interest on time for a certain period.

The ambassador believes the issue could hinder both local and foreign direct investment into the Gulf state. 

“I have had [informal] discussions within government, and it does alarm the government that there are all these non-performing loans,” Ghobash said. “They are looking at all of this, and it’s taking high priority.

“Why invest if you’re not going to be able to get your money? Why bid for a project if you’re not going to be able to be paid?”

According to UAE Central Bank figures, the non-performing loans ratio – the percentage of loans that are classified as non-performing relative to total loans – stood at nearly 6 percent in Q4 2023, but it was down by more than a percentage point compared with the previous year’s high.

Certain sectors, such as construction, have been disproportionately affected by late payments over the years, placing significant financial strain on businesses.

Ghobash said he had personal experience of the impact of late payments.

“Why did I get interested in that? Because when I was a child, I had friends whose parents had a small contracting company, and they built a road for one of the emirates.

“The emirate took its time in paying them. It took two years. But by the time they got paid, the company was bankrupt, [and] the family’s lives were actually destroyed.”