x Abu Dhabi, UAETuesday 16 January 2018

Dubai's bond 'is not a bailout'

The director general of Dubai's Department of Finance speaks about how the $20 billion in bond money will be distributed to government-related companies.

Abdul Rahman al Saleh says the department is working closely with all government-related entities.
Abdul Rahman al Saleh says the department is working closely with all government-related entities.

In an interview published by the Government of Dubai, Abdul Rahman al Saleh talks for the first time since replacing Nasser al Shaikh in May as director general of Dubai's Department of Finance about how the US$20 billion (Dh73.46bn) in bond money will be distributed to government-related companies.

A I would like to go back to earlier this year when the Government has taken a very important step in issuing the $20bn bonds. That was an immediate decision to support the government-related entities to meet their obligations. From there we have been working closely with our consultants to get the right set-up: the right set-up in the sense of how we manage the funds, how we'll be able to raise additional funds and how we can work very closely with the government-related entities. And now we have the decree, signed by His Highness, setting up the Dubai Financial Support Fund to be a separate legal entity, working very closely with the Government and supporting all strategic projects which are very important for the government strategy. The fund will be working with the government-related entities and supporting them, but it will be on a commercial basis so that it's challenging for them to meet their obligations and to be able to manage their requirements in the long term.

No, it isn't a bailout. It is important to stress here that the government-related entities have a very solid strategic position in the long term, in the sense that they have very variable and strategic projects. Also they have revenue generating that's helping them in continuing their operations. It is only to support them in meeting immediate obligations at the moment. And the support is in the form of commercial loans which will be met by them in due course as the market conditions improve. So it is not a bailout.

In principle we don't disclose how and when we support the government-related entities, but we are working very closely with all of them, and during this time all of them are subject to a defined process of getting the support and it is presented to the Supreme Fiscal Committee to make the final recommendations and allocate support. It is all based on very important criteria that must be met and the important issue is that it's strategic and it has a significant impact on the economy to get the support.

We do not disclose how the funds are disbursed, it's just like any other commercial terms. We leave it up to the recipients if they wish to disclose. We follow certain criteria to allocate the funds, and it all depends on the size of the entity, the project that it involves, with priority given to infrastructure projects that are important to the strategy of the Government in the long term.

The published figure about the total debt of Dubai is referring to the combined debt of the Government and the government-related entities. The Government part of the debt is around $20bn, which is manageable. The government-related entities' debt is also manageable in the long term. The entities are working very closely with us and we know that they have strategies to manage their debt over the long term. We are supporting them from the $20bn bonds, but we also have strategies to raise additional funds as and when required to support these entities and any other strategic projects for the Government, mainly the infrastructure projects which are in progress now.

Yes, the worst is over. The fundamentals of Dubai are strong. The strategy which was announced by His Highness is in progress. In the last few years the Government has developed the infrastructure which is very unique in the region. The metro system is on schedule to start on Sept 9. The airport expansion projects are also in progress, as per their plan. So yes, we feel that the way forward is very positive and we are very optimistic.