DUBAI, United Arab Emirates – A top Dubai finance official said the emirate fully expected fallout from its debt problems and assured foreign creditors that Dubai World's request to postpone payment on some of its $60 billion in debt was "carefully planned."
The comments by Sheik Ahmed bin Saeed Al-Maktoum, the chairman of Dubai's Supreme Fiscal Committee, came as world markets reacted in shock to what some analysts indicated amounted to a default Dubai World, the city-state's key engine of growth with interests ranging from ports to real estate.
Ahmed said the emirate's leadership thought long and hard, weighing creditors' interests, before announcing they were seeking a "standstill" on Dubai World's debt until at least May.
"Our intervention in Dubai World was carefully planned," Ahmed said in the statement released late Thursday. "The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react."
The Dubai government, in a brief statement issued Wednesday — on the eve of a three-day Islamic feast — said it would request the delay in Dubai World's debts, as well as those of real estate arm Nakheel, which has a roughly $3.5 billion Islamic bond coming due in December.
The fallout from the brief statement came swiftly, and was felt around the world. Oil prices dropped near US$74 a barrel in Asia on Friday as investors curtailed their risky bets on commodities amid uncertainty over the extent of Dubai's financial woes.
"We understand the concerns of the market and the creditors in particular," Ahmed also said.
He called the Dubai World's debt freeze request a "sensible business decision" and said Dubai's leadership had to intervene when it did "because of the need to take decisive action to address its particular debt burden."
A year after the global downturn derailed Dubai's explosive growth, the semiautonomous city-state known for its man-made islands, the world's tallest tower and indoor ski slope has been grappling with its debt load, issuing bonds that have been bought up by both the United Arab Emirates' central bank and, most recently, two banks majority owned by neighboring Abu Dhabi, the oil-rich emirate home to the UAE's federal government.
The announcement of the debt delay request appears to have largely eclipsed any assurances by the emirate's ruler, Sheik Mohammed bin Rashid Al-Maktoum, who had continually dismissed concerns over the city-state's liquidity.
Sheik Ahmed, who is also a member of Dubai's ruling family and serves as the chairman of the Emirates airline, said claims that Dubai overreached during the good times were unjustified.
Ahmed said the unprecedented growth over the past decade "helped lay the foundation for what is now a broad-based sustainable economy."
"The economic fundamentals, such as our highly developed infrastructure ...will ensure Dubai remains an attractive regional market," Ahmed said.