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Mohammed ‘not Worried’ About Maturing Debt

DUBAI — Dubai will adjust its economic strategy to deal with the impact of the global financial crisis, but economic headwinds are easing and the emirate is sound, His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, said late on Tuesday.

“I don’t think we made any mistakes,” Shaikh Mohammed told reporters. “But because of this crisis we will have to be more careful.”

Dubai enjoyed more than six years of rapid economic growth due to rising oil prices, but it has suffered from a cash shortage during the financial crisis.

Bankers are concerned about Dubai’s ability to service its estimated debt, due partly to a severe slump in its real estate industry, which has seen up to 50 per cent wiped off some property values in a year.

Shaikh Mohammed, speaking at a rare news conference at his Zabeel palace, said that the emirate would be able to repay at least $4.52 billion of debt coming due later this year.

“I assure you that we’re all right, that the United Arab Emirates is all right,” he said.

The Dubai government must repay a $1 billion Islamic bond maturing in November, while state-owned property developer Nakheel PJSC has a $3.52 billion Islamic bond due in December.

The value of Nakheel’s bond surged by 8.2 per cent on Wednesday, in the wake of Shaikh Mohammed’s comments. The 3.1725 per cent bond rose to $101.50 at 2pm in Dubai from 93.79 cents on Tuesday, according to Citigroup prices. The bond’s price had slumped to 63.5 cents on the dollar in February.

Dubai borrowed $80 billion to finance its transformation into an international logistics, tourism and finance hub, and the seizure of global credit markets sparked concern about its ability to repay the loans.

The emirate set up a $20 billion fund earlier this year to help its state-related companies, after the global financial turmoil hurt its key industries and hindered companies’ access to credit.

It raised the first $10 billion for the fund by selling bonds to the UAE Central Bank in February.

Shaikh Mohammed was speaking a day ahead of the opening of the Dubai Metro, which the government has invested billions of dollars to build.

· business@khaleejtimes.com

· With inputs from Agencies