UAE stocks plunge as govt refuses to back Dubai World's debt
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Stock markets in Dubai and Abu Dhabi nosedived on Monday, with Abu Dhabi seeing a record 8.3% fall as the government of Dubai said it would not guarantee Dubai World’s debt, effectively washing its hands of the woes facing the embattled conglomerate.
AFP - The government of Dubai does not guarantee the debt of Dubai World, a senior finance department official said on Monday, effectively washing its hands of the woes facing the embattled conglomerate.
"It is true that the government is the owner, but as the firm has several activities and exposed to different sorts of risks, the decision was from the day of its establishment that the company would not be guaranteed by the government," head of the Dubai Department of Finance Abdulrahman al-Saleh said in an interview with state-owned Dubai Television.
"The company has dealt with other parties on these bases," he said, pointing out that it was in the past "obtaining finance based on its commercial position and the feasibility of its projects."
"There is a huge mix up in the media between Dubai World and the Dubai government," he added.
He said, however, that the reaction to the government announcement last week that it was restructuring Dubai World and intends to request a freeze on its debt repayments for at least six months, was "exaggerated and unjustifiable."
He insisted that the decision was correct and that it will be to the benefit of all parties involved.
"It was a wise decision that serves the interests of all parties in the long term, but not the short term," he said, acknowledging that it "might be inconvenient for some parties," in the short term.
Dubai sent jitters throughout the global stock markets last week as investors feared a looming international debt crisis. Its debt mountain is around 80 billion dollars, of which Dubai World is reportedly liable for around 60 billion dollars.
Stock markets in Dubai and Abu Dhabi plunged Monday by 7.3 percent and 8.3 percent respectively, on the first day of trading after a long holiday which started before Dubai's shock debt alert.