In the next few years, Dubai will continue to face debt pressure.How to
According to the evaluation of Bank of America Merrill Lynch, the United Arab Emirates` total debts up to the end of 2009 are184 billion dollars. Moreover, they`ll have a large sum of debts coming due before 2013. In the latest issued report, Bank of America Merrill Lynch stated the debt crisis of Dubai is lacking in transparence because not all the official data from Dubai has been released. These uncertainties will greatly raise the risk premium of debt guarantee. And the restructuring plan declared by Dubai World is likely to cast gloom over the economic recovery prospect.
The report shows that currently the debt exposure in the UAE has not been fully revealed and the debt payment is problematic. In the $184 billion debts of UAE, Dubai owes $88 billion and Abu Dhabi owes $90 billion. Bank of America Merrill Lynch says that apart this year's 88 billion U.S. dollars of debt, there are still nearly 500 million of debts will be due in the next three years in Dubai. It`ll have about 12 billion US dollars coming due and in 2011 and 2012, they are respectively 19 billion US dollars and 18 billion dollars. Analysts expect the total debt in Dubai is $26.5 billion, the 80% of which is needed to repay in the next 3 years. The cost of debt turnover is possibly even higher than the figures estimated because these figures merely include principle reimbursement levels.
UAE central bank takes an active attitude.
In order to calm down the panic due to the credit crisis, the central bank of the United Arab Emirates in Abu Dhabi expresses that they are preparing to promote additional cash flow to be the backup force of every bank. Central bank announced in the statement that it has send the notice to each bank to which can received additional liquidity tool on special arrangements of current account. However, the interest rate is more than the interest rate of 3-month inter bank in the UAE by 50 basis points.
The UAE economist Johan Sfakianakis