Dubai debt crisis

Dubai, UAE's flagship development company Dubai World has announced a six-month standstill on repayment of its debt. The announcement has sparked fears over the emirates' financil viability.

State-owned Dubai World has US$ 59 billion of debts and news of its dire financial position follows just days after the Crown Prince of Dubai, Sheikh Hamdan bin Mohammed told the World Economic Forum summit that the UAE was on the road to recovery and that the economy was "humming" again this year.

Conversely, a government statement yesterday said, "Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill' and extend maturities until at least 30 May 2010."

Dubai World was due to repay US$ 3.5 billion of debt in December and the request for this to be delayed has seen the major credit ratings agencies downgrade not only Dubai World, but also a number of other state-backed businesses.

Dubai World subsidiary Nakheel was behind the Palm Jumeirah project and the World Islands project, on which work was suspended earlier this year.

The call for the repayment freeze is to enable Dubai World to restructure its debt, but the timing - just as the UAE starts its Eid al-Ad holiday, during which businesses and government offices will be closed until 6 December - has reportedly further hit investor confidence.

Chairman of Dubai's Supreme Fiscal Committee, Sheikh Ahmed bin Saeed al-Maktoum said, "I understand the concerns of the financial markets, but decisive action was needed to address Dubai World's debt problem."