Dubai is not in negotiations with Abu Dhabi to refinance a $20 billion debt that will be due next year, a top government official said on Tuesday.
Dubai borrowed a total of $20 billion from Abu Dhabi and the Federal Government of the UAE when the financial crisis hit across the globe in 2009. The debt comprises $10 billion from the UAE Central Bank, which is due to mature in February 2014 and $5 billion each from two state-owned banks in Abu Dhabi — National Bank of Abu Dhabi and Al Hilal Bank — maturing in November 2014.
“Dubai companies are doing well and can take care of their own debt,” Shaikh Ahmed bin Saeed Al Maktoum, chairman of Dubai’s Supreme Fiscal Committee, told reporters on the sidelines of the sail-away ceremony to mark the commencement of the delivery of the pioneering Prelude FLNG Turret Modules to owner Shell.
According to government forecasts, Dubai’s economy is recovering fast and set to expand 4.6 per cent, on average, between 2012 and 2015, more than twice the growth of the previous four years. The borrowed money was mainly used to support debt restructuring of Dubai World and property developer Nakheel, the builder of the palm-shaped islands. “No, we are not talking to Abu Dhabi,” Shaikh Ahmed, who is also President of the Dubai Civil Aviation Authority, Chairman of Emirates airline and Chief Executive of the Emirates Group, responded to a question if both emirates are holding discussion to roll over the debt. He did not elaborate further.
Dubai’s growing population, improving economy and its status as a safe haven amid political and economic unrest in other parts of the Middle East have helped boost apartment prices by 38 per cent in the past 12 months, according to Standard Chartered Bank.
Dubai’s government is working on new rules to protect its real estate market and prevent any excessive rise of property prices that could end in a crash, Shaikh Ahmad said.
“We are working on our regulations. Sometimes I don’t see that [high property prices] are a good thing. We don’t want Dubai to become an expensive city,” he added. He did not give details of the proposed regulations. In a July report, the IMF said Dubai might need to intervene in its property market to prevent another boom-and-bust cycle.
Last year, the UAE Central Bank tried to introduce caps on home mortgage lending as a way to head off another bubble, but it suspended them after lobbying by commercial banks, which complained their business would suffer. The central bank is now negotiating revised caps with the banks, which are expected to be announced by the end of this year.
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