UAE's external debt put at $170b

Dubai: The UAE's external debt currently stands at Dh623.9 billion ($170 billion) this year, up from last year's Dh532.15 billion ($145 billion), according to the latest report by credit rating agency Fitch Ratings.

"After growing by 70 per cent in 2007, the pace of debt increase seems to have slowed this year, though it still rose by an estimated $25 billion in first half of 2008 to $170 billion," Fitch said in the report.

Although this might not have any major impact on the economy as the fundamentals remains strong, the current liquidity shortage and a possible real estate market correction could hamper investor confidence further.

"The global credit crunch has focused attention on the ability to re-finance outstanding debt. Dubai corporates - both public and private - had about $11 billion of loans maturing in the final quarter of 2008, some of which has already matured or been refinanced," the report said.

Fitch estimates Dubai's non-bank foreign-currency debt at just under $70 billion, much higher than Dubai's GDP. "Of this, three-quarters is owed by majority state-owned enterprises and a further 9 per cent by companies in the Dubai Holdings group," it said.

"The biggest borrower has been majority state-owned Dubai World. However, $5 billion of its $10.5 billion debt outstanding at end September has since matured.

"The only other large loan maturity this year is owed by Borse Dubai in December. This leaves just $5.3 billion of maturities next year."

According to the International Monetary Fund data, UAE's total government debt is expected to come down to 9.4 per cent of the GDP by the end of the year, compared to 10.6 per cent in 2007.

The UAE's current account balance is expected to jump 56 per cent to $60.9 billion by the end of 2008, up from $39.1 billion last year, the latest IMF data shows.

"Growth is underpinned by high commodity prices, strong domestic demand, and also credibility of the authorities' economic policies," Dr Mohsin Khan, IMF director for the Middle East and Central Asia Department, said in a latest statement while releasing the Regional Economic Outlook.

"The region has been largely resilient to the ongoing international credit crisis and the downturn in the US and other advanced economies."

About 60 per cent of the UAE's total external debt is owed by its banks, with total external liabilities of just below $90 billion gross and $40 billion net in March 2008.

Fitch said, approximately 20 per cent of UAE bank external liabilities represent non resident deposits, reflecting the country's increasing role as a regional and international financial and business centre.

Oasis of stability

A recent economic report said the current global credit crisis could provide the UAE banking sector to stand on solid ground and prove it is still strong and protected against external impacts.

The report, released by the Abu Dhabi Council for Economic Development, said the UAE and the Gulf region in general, now looks very much like an oasis of stability compared with the US and other countries hit by the global financial turmoil.

It cited recent reports by Financial Times predicting that emerging financial centres in the Gulf could still make gains.