Once again, Dubai succeeded in putting its exceptional qualities on display last week. The reference is being made to the way the emirate moved to raise funds to meet financial commitments (paying and restricting debt) of the government and its subsidiary firms.
In effect, the authorities uncovered an ambitious $20 billion (Dh73.5 billion) bond programme. More importantly, the UAE Central Bank agreed to unconditionally subscribe $10 billion of bond issuance. The development demonstrated Dubai's ability to raise funds from local sources without causing a crowding out effect. In other words, borrowing such a sizable amount from the banking system could have undermined the ability of private sector firms to obtain credit at a critical time, namely the ongoing financial crisis.
The money will be partly used to pay off arrears to developers of state projects. Some $2.2 billion will be made available in escrow accounts through Dubai's Real Estate Regulatory Agency (Rera). In particular, the real estate sector should emerge as main beneficiary of fresh liquidity. The debt programme should help the emirate denying the financial crisis turning into an economic one.
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