Dubai’s financial crisis triggers fears of global panic

November 27, 2009

(ChattahBox) — Global stock markets were left reeling yesterday, after Dubai, the gulf emirate that has grown explosively over the last decade, admitted it could struggle to repay its debt, which would be a major blow to the banking sector.  The emirate known for its man-made islands, the world’s tallest tower and indoor ski slope has said it has $80bn of debts, though some analysts say the true figure could be double that. Dubai World, the state-owned holding company whose bail-out plans triggered the current crisis, has liabilities of about $60bn, though only part of that is debt. Part of the United Arab Emirates (UAE, it already has been bailed out to the tune of $10bn by fellow UAE member Abu Dhabi, and it had managed to scrape together another $5bn from two Abu Dhabi banks hours before the request for a “standstill agreement” to give Dubai World and  those of real estate arm Nakheel, time to “restructure” itself. Dubai World, has now sought permission from more than 50 international lenders for a six-month freeze on repayments of up to $80 billion of loans.

Sheikh Ahmed bin Saeed al Maktoum the chairman of Dubai’s Supreme Fiscal Committee, and the uncle of Dubai’s ruler Sheikh Mohammed bin Rashid al Maktoum, attempted to calm the situation last night.

“Our intervention in Dubai World was carefully planned and reflects its specific financial position,” he said in a statement.

“The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular. However, we have had to intervene because of the need to take decisive action to address its particular debt burden.”

The cost of insuring the emirate’s debt increased again, indicating that the markets believe there is more chance of Dubai defaulting on its debts. Predictions that Dubai could drag the world economy downwards again knocked $5.50 off the price of a barrel of oil, to $72.49.  Wall Street will start a half-day trading session at 2.30pm GMT, having been closed yesterday for Thanksgiving. The Dow Jones is expected to lose 240 points when trading begins, which would be a fall of around 2.3%.

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One Response to “Dubai’s financial crisis triggers fears of global panic”

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