Dubai may face problems refinancing $20bn of debt

Dubai government and its companies could face difficulty renewing around $20 billion in loans they have taken out with international banks due to the escalating global financial crisis, according to analysts.

Analysts warned the lack of liquidity in the banking sector could see banks unwilling to refinance the debt, especially that of companies connected to the real estate sector, which could stunt economic growth, UAE daily The National reported on Wednesday.

“People are worried whether the big Dubai names will be able to roll over their debt, especially those who are related to real estate,” Ibrahim Masood, a senior investment officer at Mashreqbank, was quoted as saying.

“Given the level of growth we’ve seen, there must have been a large amount of funding raised to fuel that growth, and the funding is not of an indefinite maturity.

"The credit prices for guys like Dubai Holdings are so high right now, that people are beginning to take a serious look at whether those guys will be able to roll over the debt when it reaches maturity."

Eckart Woertz, an economist at the Gulf Research Centre, told the newspaper the UAE, and in particular Dubai, was "vulnerable" to a liquidity squeeze.