The International Monetary Fund said it isn’t worried about Dubai’s ability to meet its financial obligations after the emirate that almost defaulted in 2009 successfully managed to reschedule payments.
“So far the government-related entities have managed debt rescheduling from 2009 quite successfully,” Masood Ahmed, the head of the fund’s Middle East and Central Asia department, said in Dubai today.
Dubai’s government redeemed a 3.3 billion dirham ($898 million) liability that matured in April, and three state-linked companies paid or refinanced $3.75 billion of debt last year, bolstering investor confidence. The emirate is committed to repaying its debts, and will do “whatever we have to do,” Sheikh Ahmed bin Saeed Al Maktoum, head of the emirate’s Supreme Fiscal Committee, said in an interview May 8.
Dubai and its entities spent about $113 billion to transform the emirate into a tourism and commercial hub, according to IMF estimates. The government has $26 billion of principal payments outstanding on bonds, including $17.93 billion maturing next year, data compiled by Bloomberg show. Moody’s said in March that Dubai faces a “pivotal year” in 2014.
“Debt levels in Dubai are still quite high at about 100 percent of gross domestic product,” Ahmed said.
The emirate’s economic growth may accelerate to 4 percent this year as the construction and logistics industries revive, Ahmed said. Dubai should take steps to avoid “another boom-bust cycle” in real estate, he said.