Dubai has several options to handle its upcoming debt maturities and refinancing requirements, mainly thanks to reviving economic growth and stable income streams, a senior executive at Deutsche Bank said on Tuesday.
“There are many options to handle upcoming debt maturities. When you have assets and/or the right level of income, you can solve them with the right amount of creativity,” Salman al-Khalifa, global markets head for MENA and country head for the United Arab Emirates, told the Reuters Middle East Investment Summit.
Dubai has been in the spotlight over its debt woes since late 2009, as it has struggled to rebuild investor confidence after state-owned Dubai World announced a $26 billion restructuring.
The emirate’s government-related entities (GREs) can pay down or refinance nearly $14 billon in debt maturing next year with relative ease, J.P. Morgan said in a research note earlier in the month.
Economic zone Jebel Ali Free Zone (JAFZA) and Dubai International Financial Center Investments (DIFCI) have $1.25 billion and $2 billion respectively in debts maturing next year.
“In general when you look at the refinancings, you have to look at the overall picture,” Khalifa said.
“For example, the economic activity in Dubai has been very solid and continues to grow. That activity is one of the big drivers of government income, which in turn is a major source of dealing with any potential issues as they arise.”
The bank expects to tap business opportunities related to social and infrastructure developments as governments focus more on these sectors after the Arab spring uprisings.
GCC governments' plans
Governments across the Gulf Arab region are planning to beef up social and infrastructure spending, aiming to create jobs and improved the lifestyles of a young and growing population.
Saudi Arabia announced a $130 billion economic package earlier this year to curb popular unrest in the kingdom.
“Banks operating in the region will have many opportunities as governments increase spending on job creation, housing, seeding businesses and other initiatives,” Khalifa said.
However, tough capital market conditions in the region so far this year are expected to continue to the fourth quarter as investors take time to “digest” the events that unfolded in the region before making concrete decisions, the executive said.
“The pipeline is looking strong if underlying economic factors continue to be strong,” he added.
According to Ernst & Young, the value of MENA initial public offerings fell 52 percent in the second quarter of 2011, while several companies in the region cancelled or postponed planned debt issuances due to the volatile market conditions globally.
The bank expects tough market conditions in the Middle East and North Africa region this year, Khalifa had told Reuters in June.