Dubai royal family defends debt request
Decision to freeze shocks markets
DUBAI: A top Dubai finance official said the emirate fully expected fallout from its debt problems and assured foreign creditors that Dubai World’s request to postpone payment on some of its $ 60 billion (R450bn) in debt was “carefully planned”.
World markets yesterday reacted in shock and dismay to what some analysts indicated amounted to a default by Dubai World, t he citystate’s key engine of growth with interests ranging from ports to real estate.
Sheik Ahmed bin Saeed AlMaktoum, the chair man of Dubai’s Supreme Fiscal Committee, said t he emirate’s leadership had thought long and hard, weighing creditors’ interests, before announcing t hat t hey were seeking a “standstill” on Dubai World’s debt until at least May.
“ Our intervention in Dubai World was carefully planned,” said Ahmed – a member of t he emirate’s ruling royal family – on Thursday.
“The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react.”
The Dubai government said on Wednesday – the eve of a three-day Islamic feast – it would request the delay in Dubai World’s debts, as well as those of real-estate ar m Nakheel, which has a roughly $3.5bn Islamic bond coming due in December.
The fallout from the brief statement came swiftly, and was felt around the world.
Oil prices dropped near US$ 74 a bar rel i n Asia yesterday as investors curtailed their risky bets on commodities amid uncertainty over the extent of Dubai’s financial woes.
“We understand the concer ns of the market and the creditors in particular,” Ahmed said.
He called t he Dubai World’s debt freeze request a “sensible business decision” and said that Dubai’s leadership had been forced to intervene when it did “because of t he need to take decisive action to address its particular debt burden”.
A year after t he global downtur n derailed Dubai’s explosive growth, the semi- autonomous city-state known for its man-made islands, the world’s tallest tower and indoor ski slope has been grappling with its debt load.
It has issued bonds that have been bought up by both the United Arab Emirates’ central bank and, most recently, two banks majorityowned by neighbouring Abu Dhabi, the oil-rich emirate home to the UAE’s federal government.
The announcement of the debt-delay request appears to have l argely eclipsed any assurances by the emirate’s ruler, Sheik Mohammed bin Rashid Al-Maktoum, who had continually dismissed concer ns over t he city-state’s liquidity.
Ahmed serves as the chairman of the Emirates airline, said claims that Dubai overreached during t he good times were unjustified.
Ahmed said t hat t he unprecedented growth over the past decade “helped lay the foundation for what is now a broad-based sustainable economy”.
“The economic fundamentals, such as our highly developed i nfrastructure, will ensure Dubai remains an attractive regional market,” Ahmed said. – Sapa-AP