By Rob Corder
A $10 billion line of credit by the UAE Central Bank has more than monetary value to the government of Dubai.
It may not be the end of Dubai’s difficulties, it may not even be the beginning of the end, but Sunday’s injection of $10 billion from the UAE Central Bank into Dubai’s $20 billion bond certainly has investors feeling that it is the end of the beginning for the credit-crunched city.Towards the close of trading on Monday, the Dubai Financial Market was up almost 8 percent, and previously battered stocks such as Emaar had surged 15 percent.
The launch of a $20 billion bond by the Dubai government had the potential to spook investors already short on confidence.
But the show of support by the UAE Central Bank sends the clearest signal to date that the federation of emirates will work through the global economic challenges in unison. The seven emirates will not go it alone.
The announcement by the Dubai Finance Department also demonstrated the energy and expertise that has gone into finding solutions to the economic downturn. The department, it would seem, has been working day and night to secure a deal on terms that few thought possible.
Dubai Inc. debts that fall due this year total around $15 billion, but rather than allowing the market to wobble in the lead up to every bond repayment date, the government has got ahead of the market and created a buffer.
It is now assumed that, not only does Dubai have sufficient funding to roll over its current debt obligations and finance its infrastructure investment programme, it also has the backstop of the federal government to step in if conditions deteriorate further.
Plenty of uncertainty remains. How long will it take Western and Asian economies to recover? Where is the oil price heading? When will global banks start lending to each other again? What will be the long term effect of the regional real estate recession?
Dubai and the rest of the UAE will continue to be buffeted by these local and global challenges, but by standing together they will face the future as one of the best placed countries in the world to capitalise on any recovery.
Dubai is the most global market in the Middle-East and this has served the city well during a period of strong global economic growth but now there is a greater challenge in a period of synchronised global slowdown to the extent that IF there is any foreign liquidity left in the UAE, it is likely to disappear, complicating the Central Bankâ€™s desire to fill the shortage.
So when will we see the money in the market start again, as big developers seem unwilling or unable to pay there suppliers, who in turn are struggling to pay there suppliers, and so on. This is a big problem here at the moment, nobody is paying anybody anymore.... Can we not name and shame the companies that don't pay there bills????? I have a list of a least 10 just to me....