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Wed 16 May 2012 07:39 PM

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UAE gov't firms face $30bn debts due in 2012

IMF also says 'significant amount of debt' due in 2014-15; welcomes Dubai consolidation

UAE gov't firms face $30bn debts due in 2012
(Bloomberg)
UAE gov't firms face $30bn debts due in 2012
UAE gov't firms face $30bn debts due in 2012
International Monetary Fund

The International Monetary Fund said government-related companies in the UAE have about $30bn of debt due this year.

The companies also have a “significant amount of debt” due in 2014 and 2015, the IMF said in a statement released on Wednesday.

Its executive directors said they "welcomed the consolidation plans in Dubai, which will help improve the emirate’s debt sustainability in the face of contingent liabilities related to government-related entities and the still weak real estate market".

Directors also stressed the need for further efforts to mitigate the fiscal risks posed by government-related entities, saying GREs were "still faced with high refinancing needs and are reliant on foreign funding".

They also welcomed the "continued economic recovery and favourable near-term outlook" but added that downside risks remained from the uncertain global environment and regional geopolitical tensions.

IMF directors urged UAE authorities to continue their efforts to sustain growth and diversify the economy, while maintaining macroeconomic and financial stability.

In the statement, the IMF emphasised the importance of managing public expenditure carefully in light of recent salary increases.

IMF directors also lauded the resilience of the banking sector grounded on "ample liquidity and capital buffers".

"The recovery of the economy is continuing despite the uncertain global economic environment. High oil prices and increased production, strong growth in Asia, and the UAE’s perceived safe haven status in the context of the regional turmoil contributed to an estimated real GDP growth of 4.9 percent in 2011," the IMF statement said.

Despite the continued weakness of the construction and real estate sectors in the wake of the 2009 crisis, real nonhydrocarbon growth picked up to an estimated 2.7 percent last year, supported by trade, logistics, and tourism.

For 2012, oil production is projected to be flat, whereas non-oil growth is expected to strengthen further to 3.5 percent.

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mudassir 7 years ago

I see the rents shooting up again, and with “significant amount of debt” due in 2014 and 2015 ....if the investors start to turn back from dubai...we will be in some big big mess this time...we already know UK is in 2nd recession...

Mounir 7 years ago

Any conversation about debt without looking at revenue is a faulty one. Every country in the western world is up to its eyeballs in debt, but they continue to thrive because they generate enough revenue to service the debt.

In the UAE's case (yes, UAE, not just Dubai, not just Sharjah, not just Fujairah.. UAE):

$30b of debt

versus

$100(per barrel of oil) x 2.5m (barrels of oil per day) x 365 (days per year) = $91b

i was never good in math, but $91 billion is about 3 times more than $30billion, no? So the fact is that with the conservative price estimates of oil and production, the UAE's revenue is still more than enough to cover its annual budget expenses AND the total debt obligation using *only* oil, forget about all the other revenue sources like import/export taxes, service fees, yadda yadda.

Just try to be fair.

Wildwine 7 years ago

"Every country in the western world is up to its eyeballs in debt, but they continue to thrive" - you mean like UK, Italy, Spain, Portugal, are doing? or are you referring to the EUROZONE?

So you think the $100 per barrel has no costs associated? Do you know what is the break-even price for barrel of oil in UAE? If I am not mistaken it is north of $100.

Do you think $100 oil will stay; especially if crisis in EUROZONE continues.

UAE is fine; especially compared to most other countries in the world and despite the load of Dubai debt. But please don't bring silly arguments.

Telcoguy 7 years ago

@Wildwine $107, the highest in the GCC, published in these same page beginning of April I think.
Just to be fair.

Mounir 7 years ago

Telcoguy

I dont know if you were trying to be funny or not; but $107 is NOT the break even price for oil in the UAE. It actually costs around $10 a barrel (and this is up from $3 - $4 per barrel a few years ago). So the net profit is quite high, and the cost of operating is still low because UAE oil is relatively easily extracted, not like that of Canada's tar sands.

Now if you are talking about the cost, relative to the barrel of oil, for all the projects that the government is carrying out, then yes we would be talking about the $107 range but you have to keep in mind 2 things:

1) this amount covers all investment the UAE carries out in infrastructure, housing, healthcare, energy, and so many others that WILL generate revenue

and

2) this amount is only based on today's economy which as we know is not as strong as it was a few years ago (when the 'break even' cost was around $30 or $40). If the economy improves, the $107 figure will drop, leaving a lot of profit.

Telcoguy 7 years ago

Mounir,
I am not attempting to be funny, enough clowns already.
Why are you bringing oil extraction costs escapes me. Most people understand what break-even price is, but I will quote for your enjoyment:
"the dollar amount per barrel that would be required for an oil-producing country to balance its fiscal budget"
This is at least what the IMF uses, if I remember right you are great fan of IMF reports even if sometimes you get a little bit confused. You can find more here:
http://www.imf.org/external/pubs/cat/longres.aspx?sk=24751.0
The source for the $107 break-even price here:
http://www.arabianbusiness.com/uae-break-even-oil-price-rises-us-107-453437.html
Now, to the point of the article. UAE gov't firms face $30bn debts due in 2012.
The two important bits here are $30bn and 2012.
"Future revenue" and "economy improving" are hardly relevant.
Any revenue from infrastructure investment will not come in 2012.
About the economy, what my greeks cousins leave intact we will take care :)