x Abu Dhabi, UAEThursday 18 January 2018

Debt restructuring of UAE companies is crucial: IMF

IMF official says refinancing of debts will be an important factor in assessment of the country's economic outlook.

The successful restructuring of troubled UAE companies will help to determine the IMF's outlook for its economy, says a senior official at the fund.

"The issue of dealing with that will be important, as will other issues like the outlook for energy prices [and] global growth," said John Lipsky, the first deputy managing director of the IMF.

Mr Lipsky was speaking on the sidelines of the World Economic Forum Summit on the Global Agenda in Dubai yesterday.

Several companies, including government-related entities, are pressing ahead with refinancing debts or restructuring portfolios to put their businesses on a sustainable footing after the global financial crisis.

Dubai Holding is the latest company to seek a restructuring after Dubai International Capital, its private equity arm, was hit by a decline in the value of its global portfolio of assets.

It comes after Dubai World, another state-controlled company, agreed to a restructuring of US$24.9 billion (Dh91.45bn) of debts with creditors.

Nakheel, the conglomerate's property subsidiary, and the utilities company Tabreed, are also progressing with efforts to refinance debt.

The IMF has highlighted a positive outcome as a necessary step to restore confidence in local markets and ease the flow of liquidity in the financial sector.

Last month it upgraded its forecast for UAE growth to 2.4 per cent, rising to 3.2 per cent next year.

The recent surge in oil prices, reaching more than $84 a barrel, is another reason for the IMF raising its outlook.

But sovereign debt problems in the euro zone remain a concern. On Sunday EU ministers hammered out an €85bn (Dh411.07bn) bailout for Ireland and now Portugal is in the spotlight amid fears the crisis could escalate.

Mr Lipsky said the IMF had not lowered its forecast for oil prices because of the problems.

"In broad terms, global energy prices reflect the strength of global economic growth," he said. "For now, despite these risks created by these specific problems, we've continued to maintain our outlook for global growth in the coming year of a moderate economy with some downside risks.

"That's so far been associated with relatively strong and relatively stable energy prices."

There have also been misgivings at the summit over local currency valuations. The US has accused China of undercutting the yuan to bolster exports and ensure a healthy trade surplus, leaving the UAE and other GCC states pegging their currencies to the US dollar caught in the crossfire.

"China economically and in trade is emerging very fast but its currency is slower to change as it is still managing a decision about how to make its currency fully convertible," said Zhang Yunling, the director of international studies at the Chinese Academy of Social Sciences.