Global investor attention was focused on this piece of the Middle East hot spot when last Wednesday Dubai World announced the delay of debt payments. Statistics show that United Arab Emirates has many debts fallen due this year. The crisis of Dubai may be only a tip of the iceburg.Why the Most Expensive tiffany jewelry in This Season are So Ugly?
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According to the Merrill Lynch estimates of Bank of America, the total debt of the United Arab Emirates is 184 billion U.S. dollars at the end of 2009, while there will still be a large number of debts will be due in the region by 2013. Merrill Lynch says in a newly-released report that as the official statistics wasn't fully released, there is lack of information transparency in the debt storm. A higher risk premium will be demanded from these uncertainties. And it may impact the prospect of the financial recovery in Gulf that Dubai World declared the plan of restucturing.
It is shown in the report that, given that the debt risk exposure in Dubai region isn't entirely appear, the debt payment is still quite problematic. In the 184 billion US dollars' debt of UAE, Dubai claims 88 billion US dollars of it while Abu Dhabi shares amount of 90 billion US dollars. Bank of America Merrill Lynch says apart from the debt of 88 billion dollars this year, Dubai will still have debt due of 50 billion dollars in the future three years. Which includ about $120 billion in 2010, while $19 billion s and $180 billion respectively in year of 2011 and 2012. It is estimated by the analysts that the total debt of Dubai is 26.5 billion of which 80 percent of money should be paid back in the next three years. While the turnover costs of the debt may be higher than the valuations, because these figures only include the amount of principal repayment.
UAE central bank shows a positive attitude.
To appease the market-panic by the debts crisis, UAE Central Bank in Abu Dhabi announced on Sunday that it is setting extra liquidity facilities, backing banks sectors. Central bank announced in the statement that it has send the notice to each bank to which can received additional liquidity tool on special arrangements of current account. However, the rate is 50 points higher than 3-month inter-bank rate of call in UAE.
Concerning the statement of central bank, John Sfakianakis, a economist in United Arab Emirates, said the move is to regain the confidence of investor and avoid the extended panic caused by crisis. But he also said that the statement made no mention of Dubai, at the same time the central bank did not disclose the specifics of this arrangement the size or value.
As for the suspicion and guessing from the outside, the officials from Dubai and Abu Dhabi on Monday denied that there exists crack between the two local governments. They further said that the discussion over finance support to Dubai was carried out among Dubai, the central bank and federal authorities.
At present, the outside world and investors are concerned about how Abu Dhabi would solve the problem. Because Abu Dhabi is both the financial provider of the UAE central bank and also a key factor to protect the financial health of Dubai
