More on Dubai's economic problems

Investmengt International reports that:

"The United Arab Emirates (UAE) has pledged $10bn to prop up Dubai, one of its most ambitious members, Dubai’s government has said.
Dubai launched a $20bn long-term bond programme in an effort to cover loans that financed its aggressive development strategy.
The Central Bank of the UAE has bought up the first tranche, $10bn, of the bond issue. The five-year bonds pay 4% per year.

“This is a clear step from the central government to back up Dubai,” said Khald Masri, a partner in Rasmala Investment, a very active investment bank in the region. “The central government’s step will help ease the tense situation in the local economy and markets.”
Dubai admitted that it needed the Central Bank money to stay afloat as credit has dried up.

“This issuance will provide the Dubai Government with the necessary liquidity to substitute the liquidity that has dried up globally in the last 12 months and accordingly meet all upcoming financial obligations,” it said. “This program will secure the necessary funding for Dubai to meet its financial obligations and continue its development programme.”

The bond is an unsecured fixed rate paper, Dubai said.
Initially, the Dubai stock market rallied at the news, rising by nearly 8%. Dubai, one of seven Gulf emirates that together make up the UAE, launched ambitious plans in the past decade to become a global hub for service industries such as information technology and finance as well as a tourist destination.

It lacks the oil reserves of other members such as Abu Dhabi, the capital of the UAE and its wealthiest member. Dubai took out huge loans to finance its plans.

Moody’s Investors Service warned in October that Dubai may need help from Abu Dhabi to pay for its debt. The emirate may have to refinance $15bn this year in maturing loans and bonds, Moody’s said."