Markets breathed a sigh of relief this week as oil-rich Abu Dhabi threw its fellow emirate Dubai a $10bn lifeline. The move takes the total support it has given Dubai this year to $25bn.
The $10bn will be used to settle a $4bn Islamic bond, due this week, issued by Nakheel, the property arm of state-backed conglomerate Dubai World. It will also fund Dubai World while it negotiates a restructuring of $22bn of debt.
"We've avoided a dramatic, chaotic and disorderly default," says Mohieddine Kronfol of Algebra Capital. But Dubai's problems look far from over. Its cash needs are "not going to go away", says John Sfakianakis of Banque Saudi Fransi.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
According to UBS, another $32bn of debt repayments are due over the next three years, while Morgan Stanley estimates that Dubai's overall public and quasi-public debt has reached $108bn, or 140% of GDP of which $46.7bn may have to be restructured.
A particular worry is Dubai Holding, the personal investment vehicle of Dubai's ruler Sheikh Mohammed, which has built up overall debts of almost $10bn. The upshot, says Goldman Sachs, is that this won't be the last tranche of aid from Abu Dhabi.
-
Which investment trusts could benefit from lower interest rates?As vehicles for long-term investments, many investment trusts were hit when interest rates rose in 2022. With interest rates expected to fall by the end of the year, could now be the time to invest in one of these unloved sectors?
-
How to protect your personal and financial data from cyber attacksM&S and the Co-op are the latest retailers to suffer from cyber hacks but consumers also need to be vigilant
