Dubai was known for its extravagant projects such as the Palm Jumeirah, artificial islands and the world’s tallest tower Burj Khalifa and as a result of the world fianncial crisis more recently ,having to put its finances back in order.
Dubai announced in a prospectus on Sunday that it would launch a new $5 billion Euro Medium Term Note framework for future debt issuance. A drop in the ocean vsDubai’s overall debt load iestimated at $115 billion or 140 percent of its economic output,.
So why the market confdence in Dubai? Tightening bond spreads and an oversubscribed bond from its flagship airline recently shows the appetite for Dubai debt rising in recent months, with the emirate seen as a safe haven as social unrest spread to Syrai, Bahrain, Oman and Yemen. The United Arab Emirates and Qatar are the only two states in the Gulf, the world’s top oil exporting region, which have not seen any protests inspired by uprisings that toppled leaders in Egypt and Tunisia. Dubai’s budget deficit more than halved to 6.02 billion dirhams ($1.64 billion) or 2 percent of gross domestic product last year from 2009
SHRINKING GAP
The shape of Dubai’s finances is expected to improveagain this year helped by banking sector stabilization, trade recovery, oil prices at around $100 per barrel as well as austerity measures. Revenue is likely to exceed that set out in the budget. The out turn will depend on actual spending levels
In January, Dubai’s ruler approved a 2011 government budget with a lowest deficit in four years of 3.78 billion dirhams, or 1.3 percent of economic output, with revenue set at 29.91 billion and expenditures of 33.7 billion, slightly below 2010. Dubai lacksthe oil wealth of neighboring Abu Dhabi, but has no current plans to implement corporate or income taxes, . Various fees from housing to tourism make up around 62 percent of its budget. and Besides customs duties, Dubai levies a 20 percent income tax on profits earned by foreign banks.
The public sector plays a leading role in the Dubai economy, which accounts for 28 percent of the overall output of the UAE, the world’s No.3 oil exporter, but the direct government spending amounts to just 10 percent of GDP. A government official said in May that Dubai, bracing for some $30 billion in debt redemptions over the next two years, plans to cut state spending by 20 to 25 percent until 2013 to further narrow its funding gap.
Dubai’s trade and property-based economy expanded by 2.4 percent last year, higher than a previous 2.2 percent estimate by the emirate’s statistics office. It had shrunk by 2.4 percent in 2009. The tourist sector has benefitted from troubles elsewhere in the region. Dubai Ports are busy with increasing world trade, new airport road and the metro, and improvments in roads, and public transport and leaner private sector Dubai has survived and largely silenced its crtics. Increasing fuel and food prices and a weaker currency will still pose challenges but that is true for most of the world and though the boom years may be over for now in Dubai , but it has proved remarkably resilient and looking at the rest of the world’s economic bad news the new bond will probably sell out quickly.
