The Government can and will meet all obligations concerning Dubai's US$80bn debt, officials say.
Dubai debt at US$80bn
Dubai's debts stand at US$80 billion (Dh294bn), which are well within the Government's ability to service, according to Mohamed Alabbar, chairman of Emaar Properties. Speaking at DIFC Week in Dubai, Mr Alabbar said the figure consists of $70bn Government debt and $10bn of debt from state-affiliated firms. "The Government can and will meet all obligations going forward." However, that are calls for greater control over the issuing of credit, with the threat that non-bank lending organisations could hurt the financial stability of the country if not regulated.
Bryan Stirewalt, the director of supervision at Dubai Financial Services Authority, said that lenders that are closely tied to property developers employ less stringent loan practices than banks because they make their profits principally from the sale of the property, and not from the loan. He said similar situation in the US had caused the subprime mortgage debacle where snowballing defaults from property loans have rocked the world economy.
"That misplaced incentive (to sell the property) led to the current problems," Mr Stirewalt said. "The credit risks that they created was the hot potato that went up all the way to the banking system." His comments come the day after the UAE Government said it would merge home financing companies Amlak and Tamweel into one entity called the Emirates Development Bank. Mr Stirewalt said he foresees more regulation for mortgage lenders that are not banks.
Dubai property prices, which have been appreciating over the last few years, have begun cooling since last summer because of a global recession, economic uncertainties and the global credit crisis. firstname.lastname@example.org