Back in November, Dubai authorities shook financial markets when it asked Dubai World creditors for a six-month moratorium on debt repayment. The Dubai government owns Dubai World, whose accumulated debt stood at US$ 59 billion, 75 per cent of its total debt.
In previous years, Dubai raised US$ 80 billion in loans to fund its real estate boom, turning the emirate’s beaches into a financial hub and one of the region’s foremost tourist resorts.
However, the 2008 recession saw the collapse of property values by 50 to 70 per cent.
At least 90 banks have outstanding loans with Dubai World, which has responded to the crisis with a restructuring plan that would see its debt repaid over a seven to eight years period.
News that Dubai World would get new funds pushed up the Dubai stock exchange by 4.3 per cent.