Emirates: Dubai, budget tries to keep debt under control But doubts on ability to fulfil obligations continue

Emirates: Dubai, budget tries to keep debt under control
But doubts on ability to fulfil obligations continue
05 January, 18:02

(ANSA) - DUBAI, JANUARY 5 - The key words of Dubai's 2012 budget are caution, optimism and recovery, words that were repeated over and over by the emirate's authorities in the past 12 months to citizens, regional markets and international investors. The budget was presented a few days ago and includes a cut of 6.83 billion, to ''improve the efficiency of expenditure while boosting productivity and social and economic return." But there are still doubts if Dubai will be able to pay its pending debts: 12 billion over 2012 and more than 93 for what is called "Dubai Inc.".

The announcement between 2010 and 2011 of a restructuring of the debt of Dubai World, the government holding that forms one of the pillars of Dubai's economy, caused agitation on the regional markets, as well as outside the region. After months of negotiations with banks and creditors, DW has finalized its obligations totalling 20 billion euros, reassuring the interests that gravitate around its economy.

Still, early in 2012 financial analysts once again raised doubts about the solvency of the emirate. The government-related companies with the highest debts include Jebel Ali Free Zone, called to fulfil its obligations of 1.5 billion euros by November and DIFC, Dubai International Financial District, 970 million euros in sukuk (Islamic bonds) with maturity in 2012. There are already some "rescue'' instruments: in 2009 the Fund for financial support was created by the government of Abu Dhabi and the central bank with an endowment of 15.5 billion euros.

Another option is the sale of assets, like DW has already sold some of its international assets, but the success of this option depends on the willingness of foreign investors, which seem less than enthusiastic at the moment. According to the government programme, revenues will be close to 6.5 billion euros, 60% from taxes on services, 22% from customs duties, 11% from the oil sector and 7% from companies that are owned by the government, including Dubai Aluminium, Ducab (which produces power cables) and NBD, the National Bank of Dubai.

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