The IMF’s Wartime Audit of the UAE: What Gulf Resilience Is Made Of

The Fund’s July health-check names the buffers and instruments that let a diversified Gulf economy absorb a regional war. The harder question, for every neighbouring treasury, is which parts of the kit can be copied.

Photo: Mikhail Nilov / Pexels

An International Monetary Fund (IMF) staff team spent 7 to 16 July in Abu Dhabi and Dubai, taking the measure of an economy four and a half months into a regional war. The Strait of Hormuz has been effectively closed for most of the period since late February, per AGBI and wire coverage. A ceasefire reached in June had already collapsed. US strikes resumed on 13 July, with the team still in the field, and the naval blockade returned a day later, as CNN and NPR reported. The concluding statement mission chief Said Bakhache issued on 17 July is short, as these documents always are. It is also the closest thing yet published to an institutional anatomy of Gulf resilience.

“The UAE economy has demonstrated significant resilience amid the geopolitical conflict in the Middle East,” Bakhache says, and then does something more useful than praise: he itemises. “Sound fundamentals, ample policy buffers, advanced preparedness, and a swift policy response have contained the overall impact of the shock.” Four causes, each nameable and datable. That is what lifts the statement above reassurance.

What the Fund Says Held

The statement credits “timely and well-targeted support measures” with helping to “preserve financial stability, safeguard essential supply chains” and “sustain market confidence”. The projections underneath are more striking than the praise. After robust expansion in 2025, the Fund expects overall GDP to come in slightly lower this year, with the drag concentrated in non-hydrocarbon activity. It expects a rebound in the second half as exports recover, assuming gradual normalisation between the US and Iran. Growth then strengthens in 2027 as hydrocarbon production scales up. The fiscal balance stays in surplus on favourable oil revenues and conservative budgeting, and low public debt, in the statement’s words, provides “ample fiscal space”.

A war on the doorstep, the region’s main export artery shut, and the institutional finding is: slightly lower. Shocks of this size are supposed to break something.

A Trillion-Dirham Backstop, Used Sparingly

The statement’s “swift policy response” has a name and a date. On 17 March the board of the Central Bank of the UAE (CBUAE), chaired by Sheikh Mansour bin Zayed, approved its Financial Institution Resilience Package: enhanced access to reserve balances of up to 30 per cent of the cash reserve requirement, term liquidity in both dirhams and dollars, temporary relief on liquidity and stable funding ratios, release of the countercyclical and capital conservation buffers, flexibility to postpone loan classification for affected borrowers, and a plain instruction that banks keep financing their customers. The same 17 March release carried the collateral that made the promise credible: foreign exchange reserves above AED 1 trillion (USD 270 billion) and a monetary base cover ratio of 119 per cent.

Uptake tells its own story. By 8 May, facilities under the package totalled AED 6.2 billion across 65,379 beneficiaries, most of them individuals alongside 4,335 smaller firms and 485 corporates, according to central bank figures carried by state news agency WAM. Against a banking sector of AED 5.4 trillion that is a rounding error, which is the point: a backstop of that size works mainly by existing. Per the same figures, banking assets grew 2.1 per cent, loans 3.2 per cent and deposits 1.9 per cent between 1 March and 1 May. The financial sector did not merely hold through the war’s opening months. It grew. And the relief reached into the retail and small-business layer of a credit system whose unusual depth CFI.co examined last November in Deem Finance: Driving Financial Inclusion and Digital Transformation in the UAE.

Oil That Never Saw the Strait

Rerouting was the other absorber. Crude that would have loaded inside the Gulf moved instead through the Habshan-Fujairah pipeline to the Gulf of Oman, a line whose capacity the International Energy Agency puts at up to 1.8 million barrels per day, per Al-Monitor’s reporting in May. On 15 May Abu Dhabi’s crown prince, Sheikh Khaled bin Mohamed, ordered construction of a second line to Fujairah accelerated. That project is expected to double export capacity there when it starts up in 2027. ADNOC’s chief executive, Sultan Al Jaber, has described the closure’s worldwide cost as “a shortage of 1 billion barrels of oil at the global level”. Barrels that bypass the Strait have rarely been worth more.

The external accounts suggest the plumbing held. The CBUAE’s balance of payments update of 6 July prompted a plain-spoken WAM headline: “UAE balance of payments is back in positive territory”.

The war also reframed the UAE’s oil politics. Membership of OPEC ended on 1 May, after 59 years. Quotas had held production near 3.4 million barrels per day, roughly 30 per cent below capacity, and the stated destination, The National reported, is 5 million barrels per day by 2027. It bears on the audit at one point: the IMF’s 2027 rebound assumes hydrocarbon production scales up, and production is now unconstrained by quota.

Where the Shock Landed

The statement is specific about what softened. Heightened uncertainty weighed on tourism, transport and trade. Real estate activity moderated in the first half of the year after several years of strong growth. The effect varied by segment and location, AGBI reported, with prices generally at or above 2025 levels. Then the sentence that will follow the UAE into next year: “While the banking sector’s exposure to real estate is contained, evolving market conditions warrant continued monitoring.” Bakhache adds that “private sector credit growth is expected to moderate, reflecting a slowdown in non-hydrocarbon activity”. Read the verbs. Contained, moderated, monitored. Nothing in this audit broke.

Replicable, up to a Point

The mission’s implicit test is which of the four causes travel. The institutional parts do: surpluses banked in good years, conservative budgeting, buffers built in order to be released, a relief package designed before it was needed. Any Gulf treasury with fiscal room could assemble that kit, and several have the room. The structural parts do not travel. A coastline beyond the Strait cannot be legislated; Saudi Arabia has its own Red Sea outlet, but Kuwait, Qatar and Bahrain load almost entirely inside Hormuz. Neither can a diversification head-start, built over two decades and part of the regional shift from shipping goods to exporting knowledge that CFI.co traced in From Dubai Chocolate to AI: The Middle East in Transition. For a neighbouring finance ministry the division is stark: the fiscal half of this playbook can be adopted in a budget cycle, while the geographic and diversification half took the UAE twenty years and cannot be bought in one.

The document invites its own scepticism. A staff visit is not a full consultation; the statement carries no data tables, and the numbers arrive with the Article IV report later this year. The central projection leans on an assumption, gradual normalisation between the US and Iran, that no forecaster can underwrite; the mid-July resumption shows how quickly it can fail. Released capital buffers must eventually be rebuilt. And relief that postpones loan classification postpones knowledge as well as pain, which is one reason the Fund’s own framing concedes elevated uncertainty and considerable risks in both directions.

The Consultation to Come

Three things to watch. Whether the property moderation stays within the banking system’s capacity to absorb it, now formally the exposure under “continued monitoring”. How, and how fast, the temporary relief is unwound, since a buffer only deserves the name if it is rebuilt. And what post-OPEC production does to the fiscal surplus on which the whole edifice rests. Neighbouring treasuries will read the full Article IV as a manual when it lands. The Fund did not write its statement as one, and the question it leaves open is the one that matters most in the region: whether the formula holds through the longer and hotter conflict that resumed while the auditors were still in the country.

Sources

1. IMF, “IMF Staff Concludes Visit to the United Arab Emirates” (concluding statement of the 7 to 16 July staff visit, mission chief Said Bakhache), 17 July 2026, https://www.imf.org/en/news/articles/2026/07/17/pr26250-united-arab-emirates-imf-staff-concludes-visit (direct fetch returned HTTP 403 to this agent; text triangulated via sources 2 to 6), accessed 18 July 2026.

2. Mirage News (full carry of source 1), “IMF Staff Wraps Up UAE Visit 17 July”, 17 July 2026, https://www.miragenews.com/imf-staff-wraps-up-uae-visit-17-july-1712090/, accessed 18 July 2026.

3. UAE Today Blog (WAM carry), “IMF Confirms UAE Economy’s Exceptional Resilience, Proactive Readiness, Continued Financial Sector Growth”, 17 July 2026, https://blog.uaetoday.com/imf-confirms-uae-economys-exceptional-resilience-proactive-readiness-continued-financial-sector-growth/, accessed 18 July 2026.

4. ARN News Centre (WAM carry), “IMF praises UAE economy’s resilience, proactive readiness”, 17 July 2026, https://www.arnnewscentre.ae/en/news/business/imf-praises-uae-economys-resilience-proactive-readiness/, accessed 18 July 2026.

5. Gulf Today, “UAE economy demonstrates notable resilience during Mideast conflict: IMF”, 17 July 2026, https://www.gulftoday.ae/business/2026/07/17/uae-economy-demonstrates-notable-resilience-during-mideast-conflict-imf (fetch returned HTTP 403; headline and carried text matched the WAM copy via search index), accessed 18 July 2026.

6. AGBI (Valentina Pasquali), “Economy holds firm but IMF warns of UAE property slowdown”, 17 July 2026, https://www.agbi.com/economy/2026/07/economy-holds-firm-but-imf-warns-of-uae-property-slowdown/, accessed 18 July 2026.

7. Central Bank of the UAE, press release, “CBUAE Board Reviews Strength and Resilience of the UAE’s Financial System and Banking Sector and Approves a Proactive Financial Institution Resilience Package Backed by CBUAE’s Assets of AED 1 Trillion”, 17 March 2026, https://www.centralbank.ae/media/tqppj12e/cbuae-board-reviews-strength-and-resilience-of-the-uae-s-financial-system-and-banking-sector-approves-proactive-financial-institution-resilience-package-en.pdf (primary; full PDF read), accessed 18 July 2026.

8. ARN News Centre (WAM carry), “UAE Central Bank support package reaches AED 6.2 billion”, 8 May 2026, https://www.arnnewscentre.ae/news/business/uae-central-bank-support-package-reaches-aed-6-2-billion/, accessed 18 July 2026. Corroborating same-day carries located: Sharjah24, Gulf Today, Zawya (“reaches $1.69bln”), economymiddleeast.com.

9. Al-Monitor, “UAE to fast-track construction of second oil pipeline, bypassing Hormuz: What to know”, May 2026, https://www.al-monitor.com/originals/2026/05/uae-fast-track-construction-second-oil-pipeline-bypassing-hormuz-what-know, accessed 18 July 2026.

10. The National, “UAE announces it will leave Opec”, 28 April 2026, https://www.thenationalnews.com/business/energy/2026/04/28/uae-announces-it-will-leave-opec/, accessed 18 July 2026. Corroborating headlines located but not fetched: Enerdata, Al Jazeera (28 April 2026).

11. Central Bank of the UAE, “Developments in the UAE Balance of Payments – July 2026”, published 6 July 2026, https://www.centralbank.ae/en/research-and-statistics/latest-statistics/balance-of-payments-statistics/developments-in-the-uae-balance-of-payments-july-2026/ (page blocked to this agent; existence, title and date verified via search index). WAM carry headline: “UAE balance of payments is back in positive territory”, https://www.wam.ae/en/article/hsyht1j3-uae-balance-payments-back-positive-territory (fetch failed with a parse error; headline verified via search index), accessed 18 July 2026.

12. CFI.co, “Deem Finance: Driving Financial Inclusion and Digital Transformation in the UAE”, 10 November 2025, https://cfi.co/finance/2025/11/deem-finance-driving-financial-inclusion-and-digital-transformation-in-the-uae/ (live, title-matched), accessed 18 July 2026.

13. CFI.co, “From Dubai Chocolate to AI: The Middle East in Transition”, 3 September 2025, https://cfi.co/middleeast/2025/09/from-dubai-chocolate-to-ai-the-middle-east-in-transition/ (live, title-matched), accessed 18 July 2026.

14. CNN live coverage, “US resumes strikes while Iran says it struck two tankers in Strait of Hormuz”, 13 July 2026, https://www.cnn.com/2026/07/13/world/live-news/iran-war-trump, accessed 18 July 2026.

15. NPR, “The U.S. strikes Iran after Trump announces a renewed blockade and tolls in Hormuz”, 13 July 2026, https://www.npr.org/2026/07/13/nx-s1-5891746/us-iran-strait-of-hormuz-updates, accessed 18 July 2026. Corroborating: Al Jazeera, “US, Iran exchange attacks around Strait of Hormuz”, 13 July 2026.

16. Bloomberg, “Trump Says Iran Violated Ceasefire With Hormuz Drone Attack”, 26 June 2026, https://www.bloomberg.com/news/articles/2026-06-26/trump-says-iran-violated-ceasefire-with-hormuz-drone-attack-mqv49tcx, accessed 18 July 2026. Corroborating: PBS News, “U.S. strikes Iran in response to drone attack on cargo ship that Trump says violated ceasefire”; NPR, 27 June 2026; ABC News timeline of the US-Iran ceasefire and MOU breakdown.