DUBAI: Dubai is fully covered to service its debt for the next seven quarters because its asset base far outstrips its debts but is centralising the debt-management system, a member of the executive council said yesterday.
“The Dubai government borrowings were for government institutions or state-owned entities that have been generating positive cash flows and long-term value as opposed to supporting consumption,” Mohamed Alabbar, who is also chairman of Dubai’s Emaar Properties, said in a statement.
The executive council is the highest decision-making body in Gulf trade and tourism hub Dubai, one of seven emirates comprising the oil-exporting UAE federation.
The Dubai government does not publish official figures on the debt but Fitch Ratings said earlier this month that government-owned entities own about $70bn in foreign-currency bonds and debt.
Fellow ratings agency Moody’s Investors Services has said Dubai owed at least $47bn in debt, more than its gross domestic product.
Dubai may need help from Abu Dhabi and the UAE government to finance a surge in borrowing that paid for the world’s tallest tower, palm tree-shaped man-made islands and stakes in banks worldwide, Moody’s said in an October 13 report. Dubai’s “potential reliance” will be “most significant”' in coming years, the agency said.
As the global financial crisis sends ripples through the world’s largest oil-exporting region, analysts have begun to ask how Dubai plans to manage its debt as markets seize up.
“Dubai’s debt is a concern,” said Mary Nicola, Middle East Economist for Standard Chartered. “However, if you look at the UAE surpluses and foreign assets, those more than compensate for the debt.”
Alabbar said Dubai was focusing on a central debt management system for both the government and state-owned entities. He did not give further details on how this would happen.
“If the UAE wants to show a strong central policy, it would be good for it to buy back some of Dubai’s debt,” said Nicola.
Alabbar added the government was closely watching the real estate market and a high-level committee was exploring several initiatives to boost market confidence.
“Refinancing will come up by early next year,” said a banker from a Dubai-based lender. “It won’t be easy, but they will get the money at a higher premium. It’s a question of the UAE putting guarantees and that will be seen as Abu Dhabi helping as they have the reserves.” – Agencies