It’s difficult to gain a complete picture of Dubai’s financial status due to a lack of statistics. Credit rating agencies do not evaluate its sovereign bonds, therefore the city state has primarily relied on private placements and bilateral loans to raise funds.
According to estimations by research firms and ratings agencies, the government’s debt levels are comparable to roughly 28 percent of 2019 gross domestic product, but if debt raised via GREs is also taken into account, that amount rises to almost 100 percent of GDP.
Dubai’s government stated in its bond prospectus last year that it has no official estimate for GRE debt.
According to London-based Capital Economics, $38 billion of Dubai GRE debt is due for repayment by the end of 2024, with the most of it due in 2023.
Many of the obligations trace back to the financial crisis of 2008-09. Dubai received a bailout from oil-rich Abu Dhabi at the time, allowing it to support its state-controlled firms. Debts were extended and renegotiated.
According to traders, the belief that Abu Dhabi would back Dubai if necessary is included into the price of Dubai sovereign debt.
Despite having a top credit rating and substantially greater financial riches, Dubai’s bonds released last year that are slated to mature in 2050 are currently trading at a premium of little over 1% over Abu Dhabi’s paper with the same maturity.
“Dubai benefits from Abu Dhabi’s perceived backing, which is still a very strong credit, and might opt to provide help if needed,” said Richard Briggs, a GAM investment manager.
Is Dubai still in debt?
- The pandemic has ravaged air travel and tourism, as well as other industries such as construction and real estate, in Dubai.
- Dubai’s gross general government debt is expected to reach around 77 percent of GDP in 2020, according to S&P, a figure that differs from the Dubai government’s estimate.
- Dubai’s government-related entities (GREs) contribute to the debt picture, despite the fact that GRE debt is not included in the government’s official data.
Is Dubai declining?
According to S&P Global Ratings, Dubai’s population fell by 8.4% last year, the largest loss in the Gulf region, as expatriate employees were compelled to depart due to the economic instability caused by the coronavirus outbreak.
According to S&P estimates, the reduction in Dubai, the Middle East’s commercial and tourism capital, compares to a 4% drop in the six-nation Gulf Cooperation Council. As the virus expanded, job losses in the region accelerated last year.
Will Dubai become a ghost town?
Dubai’s tourism chief has claimed that the emirate will not become a “ghost town” after hosting World Expo 2020, justifying plans to nearly increase the number of hotel rooms.
In the run-up to the worldwide event, Dubai is spending $8 billion on infrastructure and has announced plans to assist developers in building 80,000 new hotel rooms by the Expo’s opening.
Helal Saeed Almarri, director general of Dubai Tourism and Commerce Marketing (DTCM), said the rooms will not be left unoccupied after the event, which is estimated to attract 25 million people over the course of six months.
How does Dubai get its money?
With a GDP per capita of $57,744, the UAE is the world’s third richest country, after Luxembourg at number two and Qatar at number one. The production of items and provision of services connected to petroleum, petrochemicals, aluminum, and cement account for the majority of its revenue.
How much is the Philippine debt?
This demonstrates a willingness to put up with high debt levels in the short run. As the state ran large deficits to combat the epidemic, outstanding government debt increased from 8.2 trillion pesos in 2019 to 10.2 trillion pesos in 2020. The federal debt has risen to 11.9 trillion pesos in the first three quarters of 2021. Despite not knowing the final figures for 2021, the government intends to borrow another 7.5 percent of GDP in 2022 to fund public spending. That, in my opinion, illustrates that Philippine policymakers are not afraid of capital markets punishing them for excessive borrowing. They clearly believe that counter-cyclical public spending is more vital at this moment to stimulate the economy.
Because, unlike Thailand, the Philippines’ current account swung into surplus during the epidemic, the Philippines may feel comfortable running deficits right now. The trade deficit shrank, while foreign remittances from Filipinos living abroad remained stable, implying that the current account will be stronger in 2022 than it was before the pandemic. Because a current account surplus often equals cheaper borrowing costs, this affords Manila some leeway to run deficits. According to the Department of Budget Management, the surplus will remain at 1.5 percent of GDP in 2022, and foreign exchange reserves will rise to $117 billion.
This is one of the reasons why the 2022 budget expects debt servicing costs to fall even as spending and total debt levels rise — borrowing costs are likely to remain reasonable for the time being. That might not last indefinitely (especially if the US Federal Reserve raises interest rates soon), which is why it’s critical that any money the Philippines borrows to finance its deficits is spent on things that matter. Infrastructure and education will receive a large portion of investment in 2022, although health and other social services may not have received as much funding as some would like. These are the concerns that will be debated in the Senate before the bill is passed.
But, for the time being, the most important point is that, in 2022, this administration will try to spend its way out of any remaining economic effects of the epidemic, and it will not be hesitant to run deficits or take on debt to do so. If the current account returns to deficit and borrowing costs rise, this newfound debt tolerance may evaporate quickly, and I’m sure policymakers in the Philippines will be watching this closely in the months and years ahead.
Is Abu Dhabi in debt?
The ‘AA’ grade reflects Abu Dhabi’s excellent fiscal and external metrics, as well as a high GDP per capita, which are offset by the country’s substantial reliance on hydrocarbons, a weak but developing economic policy framework, and low governance indices when compared to peers. The government debt of Abu Dhabi is among the lowest among Fitch-rated sovereigns, while sovereign net foreign assets are among the greatest.
After a deficit of 4.7 percent of GDP in 2020, we predict Abu Dhabi will have a fiscal surplus of 1.6 percent of GDP in 2021. Increased equity participation payments to state-owned firms, higher foreign aid and subsidies, and continued outlays attributable to the coronavirus outbreak will be more than compensated by rising oil income. The fiscal position will be bolstered by savings from the UAE’s partial military withdrawal from Yemen in 2020. Brent oil prices are significantly higher than Fitch projections, with an average of USD73/bbl in 2021, rather than our baseline assumption of USD63/bbl, implying a fiscal surplus of 5.9% of GDP.
The expected investment income of Abu Dhabi Investment Authority (ADIA), which had estimated foreign assets of approximately USD600 billion (320 percent of GDP) at end-2020, is included in our fiscal statistics as revenue, while the estimated cash transfers to and from ADIA are treated as financing items (in contrast, the government accounts for these in revenue and spending).
Increases in oil output will largely offset a drop in oil prices to our long-term projection of USD53/bbl by 2023, allowing Abu Dhabi to sustain a fiscal surplus in 2022-2023. By 2023, we predict Abu Dhabi’s oil production to rise to 3.2 million barrels per day, up from 2.7 million in 2021 and 2.8 million in 2020. The UAE and some other OPEC+ members agreed in July 2021 to gradually phase down their 5.8 million barrels per day output adjustment and to enhance reference production levels for the UAE and some other OPEC+ members. Abu Dhabi’s crude oil production capacity is 4 million barrels per day, as of April 2020, with plans to raise output to 5 million barrels per day by 2030.
Over the medium term, Abu Dhabi’s fiscal and external metrics are projected to remain exceptional. We expect the gross government debt-to-GDP ratio to stabilize at around 20% in 2021-2023, as greater nominal GDP offsets modest rises in debt dollar value. After high financial returns at ADIA and a drop in nominal GDP brought SNFA to 300 percent of GDP (USD593 billion) in 2020, SNFA is expected to shrink to 255 percent of GDP (USD600 billion) by 2023. SNFA would be enough to fund the government’s spending for more than seven years. In the projected period, we assume no price returns for ADIA assets, and abrupt swings in financial markets are a substantial risk factor.
In 2021-2023, we predict Abu Dhabi’s financing needs to be around 3% of GDP each year (or slightly over USD6 billion), down from 8% of GDP (USD16 billion) in 2020. The fiscal balance, less expected ADIA investment income and debt maturities, is used to calculate financing needs. We estimate net transfers from ADIA to fund the majority of the financing needs, with some debt issuance thrown in for good measure. After a record USD15 billion in 2020 and USD10 billion in 2019, the government has already given USD5 billion in 2021.
To enhance its cash reserves, the government could issue more than is required to meet its financing needs, or to take advantage of a potential yield discrepancy between expected returns on its financial investments and the yield on government debt. Recent issue proceeds, for example, might have been used to entirely cover the deficit, but they were instead used to augment government deposits in local banks while net withdrawals from ADIA were made. ADIA is planned to pay regular dividends of 1% to 2% of its assets into the budget, as per the dividend policy implemented in 2019, but these may be re-invested.
Contingent liabilities are significant in comparison to peers, although they are manageable thanks to Abu Dhabi’s large fiscal reserves. We anticipate that government-related entity (GRE) debt, which includes bank debt (excluding deposits), would reach over 80% of GDP in 2020, up from around 60% in 2019, owing to the nominal GDP contraction. Other UAE GRE debt, primarily related to Dubai, is estimated to be 76 percent of Abu Dhabi GDP in 2020, while consolidated other UAE government debt is estimated to be 43 percent of Abu Dhabi GDP. While Abu Dhabi is dedicated to the UAE’s financial stability, it was proved in 2009-2010 that its support for other UAE companies is selective and limited. The huge amount of assets held by Abu Dhabi’s GREs further mitigates contingent obligation risk.
Even while Abu Dhabi is the ultimate financial backstop of the UAE federation (its balance sheet supports Fitch’s ‘AA-‘/Stable rating of the UAE), debt issuance at the federal level could relieve Abu Dhabi of the requirement to support other emirates and their GREs. The UAE recently issued bonds worth USD4 billion. The Federal Government is not required to continue to provide significant financial support to such entities or emirates, but it may choose to do so, according to the bond prospectus, and this support could be significant in the context of the UAE’s annual budget and entail significant fiscal outflows.
We predict real GDP to be flat in 2021, following a 7% drop in 2020, as non-oil activity recovers (up 3% in 2021; -5 percent in 2020) is offset by reduced annual average oil production (down 2.4 percent yoy in 2020; 2020: -9.2 percent ). As the full-year effect of increasing oil production is felt and non-oil activity increases at a steady pace, headline growth rates will accelerate in 2022-2023. Domestic demand will be bolstered by stable government spending and a rebound in global demand and tourism, aided by the UAE’s high vaccination rates, rapid progress with booster shots, and the relaxation of coronavirus-related restrictions.
In comparison to ‘AA’ rated peers, we believe geopolitical risks are significant. Tensions between Iran and Israel, as well as the United States, have eased in recent months, but they remain a threat to the area, particularly to Abu Dhabi’s hydrocarbon infrastructure and Dubai’s role as a commerce, tourism, and financial center. The UAE is still active in Yemen’s civil war, albeit with a reduced military commitment.
How much does Dubai owe Abu Dhabi?
Bloomberg (Bloomberg) — Dubai made a rare excursion into the public bond markets, indicating that its debt burden is now significantly lower than analysts had predicted only months ago.
The government’s outstanding direct debt was 123.5 billion dirhams ($33.6 billion) as of June 30, according to a prospectus that accompanied Dubai’s scheduled issuance of bonds and Islamic securities on Monday. According to the paper reviewed by Bloomberg, that’s nearly 28% of last year’s gross domestic output.
S&P Global Ratings estimated the government’s direct debt to be $65 billion, or 56 percent of 2018 GDP, in a study released in September. In May, Bank of America Corp. said that it grew to 65.6 percent of GDP in the first quarter of this year, up from 47 percent in 2011 “It was “expected to expand higher,” according to the report.
It’s been difficult to get a good feel on the status of Dubai’s economy and finances due to a lack of regular statistics, and the emirate’s absence from markets hasn’t helped matters. Unlike its Gulf neighbors, which have been increasingly issuing public debt in recent years, Dubai has primarily relied on private placements and bilateral loans to raise funds. In 2014, it sold its last sukuk.
A request for response to Dubai’s Department of Finance was not immediately returned.
The disclosure in the bond prospectus did not provide a complete picture of the emirate’s liabilities, according to the report “There is no public information on the total amount of debt held by Dubai’s government-related companies, or GREs, or the maturity profile of that debt.
Last year, S&P analysts assessed GRE debt to be over $59 billion, or 52 percent of 2018 GDP. According to an April study by Moody’s Investors Service, Dubai’s GRE debt is concentrated in aviation and real estate.
Dubai needed a bailout from oil-rich Abu Dhabi, the largest of the United Arab Emirates’ seven sheikhdoms, just over a decade ago, to help state-controlled enterprises weather the global economic crisis.
As Dubai released its financial data, it also provided insight into how government finances responded to the coronavirus’s disturbances. The economy is primarily reliant on tourism, trade, and retail, which have been impacted the worst by the crisis. The global epidemic led Dubai to postpone the World Expo this year.
According to the prospectus, the government lowered this year’s budget revenue to 44.2 billion dirhams, down more than 30% from what it had planned. It also cut its 2020 spending forecast to 56.2 billion dirhams, leaving a deficit of 11.9 billion dirhams.
The value-added tax revenue forecast for 2020 was also cut from 11.7 billion dirhams to 9.4 billion dirhams. Last year, the levy brought in 11.4 billion dirhams in income.
Dubai owes the Abu Dhabi government and the UAE central bank a total of $20 billion, which it utilized to support strategic firms that required financial help.
The Dubai government’s debt also includes more recent borrowing for airport development and infrastructure needed to host the city’s upcoming Expo. Since the coronavirus epidemic brought global air travel to a halt in March, it has invested 7.3 billion dirhams in Dubai’s flagship airline, Emirates.
- The government raised 7.7 billion dirhams in a 10-year Islamic loan in April, which was partially utilized to cover Emirates’ financial assistance; the remainder might be used for other purposes, such as Dubai’s Expo-related expenses.
- To fund its aid to Emirates, it entered into a $275 million seven-year bilateral term loan arrangement.
- Authorities also agreed on an eight-year bilateral term loan worth 1 billion dirhams, which has been partially drawn down for Emirates and may be used for other reasons, including Dubai Expo-related expenses.
Who builds Dubai?
Sheikh Mohammed bin Rashid Al Maktoum, a 71-year-old millionaire and vice-president of the United Arab Emirates, is the ruler of Dubai. He is well-known in the Middle East for directing Dubai’s transition into a leading commercial and tourism destination.
Is UAE in financial crisis?
Following up on our recent report, the UAE Cabinet has declared an Emergency Financial Crisis in the Official Gazette on January 31, 2021.
As a reminder, in 2020, Federal Law No. 9 of 2016 (the Corporate Bankruptcy Law) was revised to include a new chapter covering measures that would apply during an Emergency Financial Crisis. An Emergency Financial Crisis, according to the amendment, is “a general condition that impacts trade or investment in the country, such as a pandemic, natural or environmental disaster, war, or other similar events.”
Due to COVID-19, the UAE Cabinet has recently confirmed that an Emergency Financial Crisis will be judged to exist from 1 April 2020 to 31 July 2021.
- If a debtor chooses to file for bankruptcy (which may result in the debtor’s restructuring or liquidation), the Court will:
- may accept such an application and refuse to appoint a trustee in bankruptcy proceedings if the debtor can demonstrate to the Court that their financial hardship was caused by the Emergency Financial Crisis; and
- During the Emergency Financial Crisis, the debtor shall not take any precautionary measures against the debtor’s assets that are required for the debtor’s business to operate.
- If the debtor’s bankruptcy application is accepted by the Court, the debtor may request a period of not more than forty business days to negotiate a settlement with its creditors (with the settlement period offered not to exceed twelve months). If creditors holding at least two-thirds of the total debt agree, the settlement will be binding on all creditors (noting there is no need for a majority of creditors).
- Bankruptcy proceedings that were filed and accepted by the Court prior to the declaration of the Emergency Financial Crisis will be continued, and the Court has the authority to extend the time limits set out in the Corporate Bankruptcy Law (doubling the prescribed time periods).
- Directors and managers of a corporate debtor have the authority to pay the company’s employees’ unpaid wages and salaries (excluding allowances, pay raises, and other contingent payments) without regard to preference issues.
- The debtor may ask the Court to help him or her acquire fresh secured or unsecured funding.
Why is Dubai building so much?
After the United Arab Emirates discovered oil in 1966, the city surged in riches, resulting in the world’s tallest building, the world’s second-largest mall, one of the world’s most opulent hotels, and more skyscrapers than any city save New York and Hong Kong.
Dubai appears to be an unmitigated success story from the outside. Unlike many other Gulf countries, such as Qatar, Saudi Arabia, and Bahrain, which rely primarily on oil exports to fuel their economies, Dubai’s economy is fueled by tourism, real estate, technology, shipping, and financial services.
According to Bloomberg, oil and gas now make for less than 1% of Dubai’s economy, down from 50% at one time.
Are Dubai skyscrapers empty?
The most famous address in the Gulf is the Burj Khalifa, the world’s tallest building. Today, roughly 80% of the luxury flats are occupied, but two-thirds of the business space remains vacant – and one owner has even attempted to sell an entire floor of the tower on an online auction site.
So, why has the structure failed to attract businesses? Is Dubai doomed to a glut of commercial oversupply for years to come, with dozens of office complexes still under construction?
Can we drink tap water in Dubai?
The Emirates Authority for Standardization and Authorization (EASA) considers tap water in the UAE to be safe for human consumption if it meets the GSO 149 norm. The Dubai Electricity and Water Authority (DEWA) ensures that the water is perfectly safe. When the water is provided, it is the users’ obligation to keep individual reservoirs and tanks clean and sanitized on a regular basis in order to maintain a particular degree of safety and remain unpolluted. Water storage tanks are also inspected and assessed on a regular basis. DEWA makes it a point to ensure that all publicly utilized tanks adhere to health and safety regulations when it comes to water storage and delivery.
https://www.thenational.ae/uae/environment/the-many-myths-of-the-uae-s-tap-water-1.15502
