Dubai debt repayments total $50bn by 2012 - S&P

DEBT VIEW: S&P estimates that Dubai will have to repay $50bn over the next three years. (Getty Images)

Accumulative debt repayments for Dubai-based government related entities (GREs) are estimated to total nearly $50bn over the next three years, Standard & Poor's said on Thursday.

The rating agency's estimate of the current total amount of debt owed by the Dubai government and its various GREs is $80-$90 billion, although it added that the margin of error was significant "given the lack of official statistics".

The agency, which has issued a number of credit rating downgrades to Dubai GREs over the past few months, said that more significant than the quantity of debt outstanding was the relatively short-term structure of the debt.

"According to approximate data contained in the report, cumulative repayments for Dubai-based GREs over the coming three years are significant and amount to nearly $50 billion, which is equivalent to around 70% of Dubai's current estimated GDP. The majority of this debt will come due in 2011 and 2012," Standard & Poor's said in a new report published on Thursday.

It said that while it expected the Dubai government to support its GREs in the future, the tough economic climate could mean that the government may be required to "distinguish among potential recipients more than assumed in prior years".

"We see a long track record of "ongoing" government support to Dubai-based GREs in the form of land grants, provision of bespoke infrastructure to support projects, and the like," Standard & Poor's credit analyst Farouk Soussa said.

"However, in terms of extraordinary support to GREs to help them avoid financial distress, the track record is much shorter, in our observations, given the relative health of the Dubai economy and the ease of obtaining market financing prior to mid-2008. That said, there have been several instances of extraordinary government support in the past year."

While Standard & Poor's said that further government support was likely, it also claimed there had been a lack of "specific assurances" with respect to the full and timely support of upcoming repayments at key GREs.

"More generally, we consider the lack of transparency with respect to the government's strategy in dealing with the financial obligations of its GREs as creating significant uncertainty," Soussa said.

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READERS' COMMENTS

Even if true it is no call for worries
Posted by Husam Al Asmar, Dubai, UAE on Saturday 17 October 2009 at 13:30 UAE time


The government has created a massive infrastructure to support growth and positive economic development in many sectors. It is unfortunate that western economies suddenly collapsed affecting to a great extent major distribution hubs as Dubai. The result is a required correction in inflation and that is healthy for recovery. The recent drop in real estate market will bring back foreign investment. Sign of recovery are starting to show and it is a matter of time before the government get their finaces back on track.

I agree
Posted by Paolo C, Verona, Italy on Saturday 17 October 2009 at 00:13 UAE time


especially on the points:"given the lack of official statistics" and "the lack of transparency". This is the part of your culture which you fail to recognize as hindering your capability to move forward.

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