Abu Dhabi and the central bank of the United Arab Emirates have agreed to refinance $20bn of debt that was extended to the Dubai government as emergency aid during its financial crisis and comes due this year, the state news agency said on Sunday.
The debt is being rolled over for five years at a 1 percent annual interest rate, WAM said in an official statement.
The roll-over covers a $10bn, five-year loan which was offered to Dubai by the Abu Dhabi government through two state-owned banks, and $10bn of five-year bonds which Dubai issued to the UAE central bank.
The agreement, which had been expected by financial markets, will enable Dubai to continue spending heavily to develop itself as a regional centre for finance, trade and tourism.
Dubai, one of seven emirates in the UAE, obtained the aid in 2009 after the global credit crisis caused its real estate market to crash, threatening to force some of its state-linked firms to default on billions of dollars of debt.
The neighbouring emirate of Abu Dhabi, which is the capital of the UAE and has vast oil wealth, stepped in to bail Dubai out. Dubai is now recovering strongly, with residential property prices up over 20 percent last year and its stock market rallying about 140 percent since the end of 2012.
This month's roll-over deal "is part of the signatories' attempts to reinforce the competitiveness of the Emirati economy regionally and internationally," WAM said. "It also reflects the positive developments that the local economy of the emirate of Dubai has seen in recent years."
Dubai's $10bn of debt to the UAE central bank had been due to mature this month; in February, Reuters quoted sources familiar with the matter as saying an agreement to roll over that amount had been reached.
The other $10bn of aid, extended through National Bank of Abu Dhabi and Abu Dhabi's Al Hilal Bank, was due to mature in November this year.
Dubai appears to be getting considerably more attractive terms in the roll-over than it obtained during the crisis in 2009; the original bonds issued to the central bank carried a 4 percent coupon.
Some of Dubai's biggest government-related entities (GREs) are working through debt restructurings launched after the crisis, and will have to sell assets to meet repayments in the next few years.
The International Monetary Fund estimated in January that Dubai and its GREs faced about $78bn of maturing debt between 2014 and 2017; this month's agreement takes care of more than a quarter of it.
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