Saudi economy, banks unaffected by Dubai debt - report

Dubai’s debt problems will have little impact on Saudi Arabia’s economy and banking institutions, a Riyadh-based investment firm has said in its latest report.

“Saudi banks have minimal exposure to the affected companies in Dubai and the direct impact on the Saudi economy will be small. Confidence about the unique dynamics of the Saudi economy meant that the stock market was largely unscathed,” said the Jadwa Investment report, quoted by Arab News.

According to the report, the Saudi Arabian Monetary Authority (SAMA) estimates local banks’ exposure to Dubai World at just 0.2 percent of total assets.

It adds it is possible for some Saudi banks to hold the Islamic bond, or sukuk, issued by indebted Dubai World affiliate Nakheel, which is due to mature on December 14, but this will only be a small proportion of their total investment portfolio, the paper reports.

Dubai World asked on November 25 to delay repayment of $26bn of debt belonging to Nakheel and Limitless as part of restructuring plans.

“We do not expect serious direct fallout on the Saudi economy,” the report said. “Companies working on projects in Dubai may see some impact and questions are likely to be raised about the projects that Dubai government-backed enterprises are working on in the kingdom.”

According to the report, the only project being undertaken in Saudi is Limitless’ $12bn Al-Wasl development in north Riyadh. Infrastructure is currently being constructed on the project.