This month, the UAE Central Bank followed the US Federal Reserve by cutting interest rates for a second time, following a reduction in September. The aim of the move is to further support the economy by boosting spending and lending. The UAE banking regulator had similarly followed the US central bank by raising rates from March 2022 to curb soaring inflation.
But why does the UAE’s monetary policy mirror that of the US? For that we go back 27 years to November 1997 when the UAE officially pegged its currency at 3.6725 dirhams to the US dollar. The dirham, established on May 19, 1973, almost two years after the UAE itself was founded, was reflective of the many emirates that came together under one flag.
A currency peg is aimed at stabilising the exchange rate between countries to support trade and reduce risk. Along with the UAE, most other Gulf countries, including Saudi Arabia, Bahrain, Qatar and Oman have also pegged their currencies to the US dollar.
“The UAE’s decision to peg the dirham to the US dollar in 1997 has brought clear benefits to the country, especially given its dependence on oil exports priced in dollars,” explains Damian Hitchen, chief executive of Asia Pacific and Middle East and North Africa at Saxo Bank.
The peg has enabled exchange rate stability, which is critical for mitigating commodity price volatility and ensuring steady revenue from exports, he says. “It has also fostered an environment of investor confidence and economic predictability, making the UAE a reliable destination for international investors. These benefits reassure us of the soundness of the peg.”
Despite the advantages, the peg means that when the dollar has faced pressure, it can also affect the UAE’s domestic monetary policy decisions.
Over the years, there have been several reports about the UAE looking at the possibility of moving its peg from the dollar to a basket of currencies, similar to Kuwait, to reduce risks. But the country’s Central Bank has reiterated that it remains confident about the dollar peg.
“The national economic indicators strongly support the continuation of the fixed peg regime. This exchange rate policy has contributed to maintaining economic stability and bolstering investors’ confidence over the long period it has been in effect,” the Central Bank said in 2014.
According to Hitchen, the peg does limit the UAE's monetary flexibility, aligning its policy closely with the US, “which may not always be optimal for local economic conditions”.
“While the peg is expected to stay in place for the foreseeable future, there have been discussions around diversifying the currency basket for non-oil trade,” he adds. “Given the UAE's economic structure and trade composition, these could shape the policy in the long term, but the dollar peg remains for now.”
Desert Warrior
Starring: Anthony Mackie, Aiysha Hart, Ben Kingsley
Director: Rupert Wyatt
Rating: 3/5
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
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THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
FIXTURES
Thu Mar 15 – West Indies v Afghanistan, UAE v Scotland
Fri Mar 16 – Ireland v Zimbabwe
Sun Mar 18 – Ireland v Scotland
Mon Mar 19 – West Indies v Zimbabwe
Tue Mar 20 – UAE v Afghanistan
Wed Mar 21 – West Indies v Scotland
Thu Mar 22 – UAE v Zimbabwe
Fri Mar 23 – Ireland v Afghanistan
The top two teams qualify for the World Cup
Classification matches
The top-placed side out of Papua New Guinea, Hong Kong or Nepal will be granted one-day international status. UAE and Scotland have already won ODI status, having qualified for the Super Six.
Thu Mar 15 – Netherlands v Hong Kong, PNG v Nepal
Sat Mar 17 – 7th-8th place playoff, 9th-10th place play-off
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
The specs
Engine: 3.0-litre flat-six twin-turbocharged
Transmission: eight-speed PDK automatic
Power: 445bhp
Torque: 530Nm
Price: Dh474,600
On Sale: Now
The Brutalist
Director: Brady Corbet
Stars: Adrien Brody, Felicity Jones, Guy Pearce, Joe Alwyn
Rating: 3.5/5
UAE currency: the story behind the money in your pockets
The specs: 2018 Audi R8 V10 RWS
Price: base / as tested: From Dh632,225
Engine: 5.2-litre V10
Gearbox: Seven-speed automatic
Power: 540hp @ 8,250rpm
Torque: 540Nm @ 6,500rpm
Fuel economy, combined: 12.4L / 100km
Five expert hiking tips
Always check the weather forecast before setting off
Make sure you have plenty of water
Set off early to avoid sudden weather changes in the afternoon
Wear appropriate clothing and footwear
Take your litter home with you
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