Gulf borrowings backed by assets

Dubai: The Gulf states have witnessed huge growth in external debt over the past few years but the region's strong asset position should enable it to support its borrowings, according to Standard Chartered Bank

Rising borrowing by quasi-sovereign entities in both the bond and loan markets have led to a steady increase in external debt of the GCC.

"Within the region, the UAE and Qatar have seen the most extensive borrowing; consequently, their external debt-to-GDP ratios are relatively high at around 50-60 per cent, while those of Saudi Arabia and Kuwait are relatively moderate at 7 per cent and 22 per cent, respectively," said Simrin Sandhu, an analyst with Standard Chartered Bank.

Over the past five years, GCC sovereigns, corporates and banks have raised over $100 billion (Dh367 billion) in the bond market.

The sovereign and corporate new-issue market went into hibernation in the second half of 2008 as a result of the global financial crisis.

However, with improving risk appetite, 2009 has witnessed a flurry of debt issuance from the region.

In the sovereign and corporate space, a total of $33 billion (equivalent) in bonds and loans will mature between now and the end of 2010.

By country, the UAE accounts for over half of the amount due during the period, followed by Saudi Arabia and Qatar.

According to Institute of International Finance estimates, the GCC's foreign liabilities have increased from $300 billion in 2006 to a forecast $485 billion in 2009 while the region's foreign assets have kept pace, rising from $1.036 trillion in 2006 to $1.49 trillion in 2009.

Among the GCC countries, Saudi Arabia's asset position is the most robust relative to its external debt, with an assets-to-debt ratio of 12 times, followed by Kuwait with 8 times and the UAE with 3 times.

The IMF estimates the Gulf region's external reserves to improve by over $100 billion in 2010 as oil prices rebound.

Assuming an oil price of $50, a Dubai International Financial Centre study estimates the oil and gas reserves of the six GCC countries at $18.3 trillion.

If oil prices were to average $100 per barrel and gas $15, the value of GCC energy reserves would be $37.7 trillion.

Dubai woos investors

The Government of Dubai will launch roadshows in Europe, Asia and the UAE starting October 22 for fixed-income investors, a statement from banks arranging the meetings said on Monday.

The roadshows will be held on behalf of Dubai's Department of Finance and will take place in Hong Kong, Singapore, Abu Dhabi, Dubai, Frankfurt and London.