The ruler of Dubai on Tuesday sought to deflect criticism of his economic policies by saying that international markets had misread an announcement by a state-owned company, in his first public comments since the debt crisis erupted last week.
“They do not understand anything,” Sheikh Mohammed bin Rashid Al Maktoum said of international investors on Tuesday as he replied to questions on the fallout of Dubai World’s request for a standstill on its debts.
In a statement published on the state news agency website, Sheikh Khalifa said the UAE was strong enough to negotiate “the current difficult circumstances of the international economy” and that most sectors of the UAE economy had begun to show growth in the fourth quarter of the year.
The comments from the emirates’ rulers appeared to reassure local markets. In afternoon trade, the Abu Dhabi index was down 4 per cent but had pared earlier losses, while Dubai was down 5.6 per cent. Qatar, which opened for the first time since the end of the Eid al-Adha holiday, was down 8.3 per cent but Cairo, which on Monday fell by almost 8 per cent, rose 2.5 per cent. Amman was down 2.2 per cent.
The price of insuring against a default by Dubai fell on Tuesday as investor fears eased. The emirate’s five-year credit default swap was priced 44 basis points lower at 526 basis points, according to CMA Datavision.
But Moody’s, the ratings agency, on Tuesday estimated that the Dubai government and its related entities had debt of $100bn – more than 100 per cent of gross domestic product and higher than the market estimate of about $80bn.
Dubai World, one of Dubai’s flagship companies, said late on Monday night it had began “constructive” talks with banks to restructure $26bn of debt, including liabilities owed by its property companies Nakheel and Limitless. Nakheel has asked for all three of its sukuk, worth $5.25bn, to be suspended from trade.
In its first statement since the crisis began, Dubai World said other companies such as DP World, Jebel Ali Free Zone and Istithmar would not be included in the restructuring because they were financially stable.
The company said it had appointed Moelis & Company as an adviser along with Rothschilds.
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