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Dubai’s debt saga
With the emirate’s total obligations now estimated at $170 billion, analysts say the government may no longer come to the rescue of its related entities.
January 20, 2010 6:17 by Aarti Nagraj
But officials quickly responded, blaming the media of confusing the debts of Dubai World with sovereign debt.
“(Dubai World) is a company set up with commercial basis and its transactions with creditors and investors were based on that respect. The gross mistake of the media is that they deem the company as part of the government. It is baseless,” Abdul Rahman al-Saleh, the director general of the Dubai Finance Department said at the time.
“Creditors should bear part of (the) responsibility as they offered loans as per feasibility of (the) projects and not upon the guarantees offered by the government,” he added.
General Dahi Khalfan Tamim, the chief of Dubai Police, also said that the “confusion should be corrected.”
“I noticed that Gulf and foreign media, as well as a large segment of general public, confuse between debts of Dubai government, which are almost non-existent, and the debts of local companies. This confusion should be corrected and the public should be made aware that to separate between the two types of debts,” he told official news agency WAM on November 30.
Despite having no legal obligations, will the government support its companies’ debt?
“Previously that was considered very likely. Now it is considered very unlikely,” Farouk Soussa, the head of Middle East government rating at Standard and Poor’s, tells Kipp.
The government did come to the support of Nakheel last month. It prevented the developer from defaulting on a $4.1 billion Islamic bond after Abu Dhabi said that it would provide $10 billion to Dubai on December 14, the day that the bond was maturing.