Fitch Ratings, a credit rating agency, says in a new report that the gross external debt of the country was an estimated US$170 billion (Dh624bn) at mid-2008, up from $145bn at the end of last year. However, the pace of the increase appears to be slowing, rising by an estimated US$25bn in the first half of this year, after growing by 70 per cent last year. Next year, Abu Dhabi entities have more debt maturing than those in Dubai - just over $8bn and $5bn respectively, the majority of it in the public sector. This represents only a fraction of Abu Dhabi's projected budget surplus, even with declining oil prices. Dubai's maturities peak in 2011 at about $20bn.
"Dubai's debt levels are quite large and there will be something of a shock for entities that enjoyed very rapid growth and debt rollover will be more difficult in the coming months," said Howard Handy, the chief economist at Samba Financial Group in Riyadh. "But Dubai is part of the UAE which is a very well provided entity." Over the past two months, the Central Bank has implemented a range of measures to shore up the financial sector. Deposits were guaranteed at all banks with significant operations and a Dh70bn liquidity facility was made available.
In the report, Fitch compiles its own estimates of the external debt of individual emirates and the UAE as a whole. These are put together using data from the Bank for International Settlements, the Central Bank and other sources. About 60 per cent of the UAE's total external debt is owed by its banks. Non-bank debt is highest in Dubai, estimated at just under $70bn at September, followed by Abu Dhabi, with an estimated $50bn for the same period. With nominal lending growth outpacing deposit growth, banks switched from being net external creditors to net external debtors last year. Fitch also notes that about 20 per cent of UAE bank external liabilities represent non-resident deposits, reflecting the country's increasing role as a regional and international financial and business centre. The UAE's top four banks by assets, accounting for more than half the assets of domestic banks, are majority state-owned.
Individual emirate governments have minimal sovereign debt outstanding. Abu Dhabi is the only emirate with an outstanding Eurobond, a $1bn benchmark issued last year. The Dubai Government has no foreign currency debt outstanding. However. most non-bank debt is owed by public-sector entities. Abu Dhabi's public-sector foreign currency debt amounts to an estimated $25bn and Dubai's an estimated $51bn, amounting to half and three-quarters respectively of total non-bank debt outstanding. Imminent maturities are highest for Dubai, with $11bn of loans maturing in the final quarter of this year. Nearly half of this has already matured or been refinanced.