Dubai debt level within manageable limits: EFG-Hermes

Dubai will tide over the global credit crunch via the help of oil and real estate sectors

To dissipate fears over Dubai's credit position, investment bank EFG-Hermes said in a research report that as a ratio to the UAE emirate's fiscal revenues, it saw little to suggest that the debt level was either unmanageable or unsustainable.

The bank said the outstanding active debt of institutions, wholly or majority-owned, by Dubai government and Dubai Holding was projected to incur a repayment of $1.1 billion over the remainder of 2008 and $14.1 billion in 2009 and $8.3 billion in 2010. This differs from Fitch Ratings recent observation that near term maturities are highest for Dubai, with $11 billion of loans maturing in the final quarter of 2008.

According to Fitch, non-bank debt was highest in Dubai, estimated at just under $70 billion at September 2008, followed by Abu Dhabi, with an estimated $50 billion for the same period. The banks said while 2009 is projected to incur the highest levels of repayments in absolute terms. The bank said since Dubai's debt obligations are well within the parameters set by international agencies, the significant widening in Credit Default Swaps (CDS) spreads for Dubai-based institutions (which effectively imply a 34 per cent probability of sovereign default) was unwarranted.