Emerging economies risk being crowded out of the international debt markets as developed countries step up bond issuances to finance their stimulus packages, the central bank governor of the UAE has warned.
“Emerging market sovereigns and corporates with financing needs…run the risk of being ‘crowded out’ as mature economies issue and guarantee substantial amounts of net debt in response to the crisis,” Sultan Al Suwaidi told the International Monetary Fund (IMF).
Abu Dhabi's $3bn bond issue earlier this year was almost two times oversubscribed, raising hopes that Dubai’s $10bn issue later this year will be well received by investors.
Dubai launched a $20bn bond programme in February and issued the first half to the UAE central bank.
The emirate is planning to issue another $10bn of bonds later this year.
Also on a bearish note, Al Suwaidi said that even cash rich governments need to factor in the possibility of a protracted downturn when drawing up budgets.
“Even for countries with relatively comfortable reserve buffers, the pace of the drawdown of reserves would have to be calibrated against a potentially prolonged downturn, and possibly supported by policy adjustment,” he said.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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