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Dubai faces billions of maturing debt

Updated May 23, 2013
— File Photo
— File Photo

DUBAI: As debt-laden Dubai’s economic recovery continues, with grandiose projects making a comeback, the emirate faces some near-term maturity of debt racked up during pre-crisis years but the prospects are not gloomy, analysts say.

Dubai is likely to manage the forthcoming obligations, part of total debt amounting to 100 per cent of its gross domestic product, according to Masood Ahmed, the Middle East director at the International Monetary Fund.

“Yes, it can manage,” he told AFP, highlighting the need to be open about the process.

“There is a substantial amount of debt that is coming due in the next few years, and it will be important to manage proactively that process. Information and communication with potential market participants will be a key part of this,” he said.In recent years, Dubai has restructured billions of dollars of debt, mainly that of its Dubai World group, which rocked global markets in 2009 when it signalled that it could not repay some $26bn of debt.

“There is likely to be another round of restructuring from 2014 to 2016, when much of Dubai’s borrowing to restructure the first round of debt from 2009 will mature,” said Monica Malik, chief economist at EFG-Hermes Emirates investment bank.

That “includes loans from Abu Dhabi and the UAE central bank, which should be rolled over easily,” she said. Deep-pocketed Abu Dhabi is a fellow member of the seven-state UAE and stepped in when Dubai was battling to solve Dubai World’s debt problems. But Dubai World later proved to be only the tip of the iceberg.

Dubai and its government-related entities (GREs) had accumulated some $113bn of debt, with $36.5bn coming due next year only, according to EFG-Hermes. But $20bn of that is owed to the UAE central bank and the government of Abu Dhabi. “We expect this to be rolled over, making overall 2014 repayments manageable,” said Malik.

Dubai has $9.4bn of debt maturing in 2013, compared with $14.6bn in 2012. Among the positive signs have been announcements by the government and GREs of deals to restructure some due debt, or repayment of maturing bonds.

Earlier this month, Dubai’s government said it repaid 3.34bn dirhams ($910 million) of bonds that came due in April. The redeemed bonds were part of a 15bn dirham bonds programme issued in 2008.

“This repayment reaffirms Dubai government’s commitment to deal with its repayment obligations in a proactive manner,” said Abdulrahman al-Saleh, director general of Dubai’s department of finance. “It also strengthens the government’s resolve to honour all its financial obligations on time,” he said.

Dubai Group, a unit of ruler Sheikh Mohammed bin Rashid al-Maktoum’s Dubai Holding investment arm, also said this month it was nearing a deal with its creditors to restructure $10bn of debt after three years of talks.—AFP