Property companies, owned by the Dubai government, are starting to pay off their outstanding contractor bills with loans from the government's bond scheme, the director general of the department of finance said on Tuesday.
A number of government-owned real estate companies had already received around $5bn of the first $10bn tranche of the bond, which was issued in March to ease liquidity in the local economy, confirmed Nasser Al Sheikh during a radio interview with Dubai Eye.
Sheikh said he could not give the names of the developers that had taken loans from the bond, which was bought in its entirity by the UAE Central Bank.
But he added that “a bit more” than $5bn had already been distributed to companies that had suffered “cash flow” problems as a result of the global economic crisis.
“It (the economic crisis) had an automatic impact on them meeting their obligations on paying contractors,” he said on air.
“We are monitoring this activity and I know for a fact it has been improving quite a lot, and all the real estate developers - the state-backed ones - have already started to pay their bills.”
Money from the $10bn bond had been distributed as loans, with borrowers paying back a slightly higher interest rate to the Dubai government than the four percent the government was paying to the central bank, Sheikh added.
“They are paying four percent, plus a marginal addition to cover our administration costs,” he revealed.
Under its bond agreement with t he central bank the Dubai government had to repay the $10bn within five years, but it was recouping money from the real estate developers in a shorter time frame, Sheikh added.
Discussions on the impact of the global crisis on Dubai’s economy had begun with the key government affiliated entities, including the troubled property developers, six months ago, he said.
However, moves to issue the $20bn bond, of which the second $10bn could be released later this year, only took place in early February.
The sum is more than enough to cover Dubai’s needs.
The government has $90bn in assets and a $10bn sovereign debt, Sheikh confirmed.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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