UAE govt-related firms to repay $30bn debts due in 2012 – IMF

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The International Monetary Fund (IMF) said in its latest report that around $30 billion of maturing loans have to be repaid by government-related companies in the United Arab Emirates. The global financial institution added that companies also face a “significant” amount of debt due in 2014 and 2015.

“Several government-related entities are still restructuring their debts and their indebtedness, refinancing needs and reliance on foreign funding remain high,” the IMF said in a statement following the conclusion of its regular Article IV consultations with the UAE.

Executive directors of the IMF said they “welcomed the consolidation plans in Dubai, which will help improve the emirate’s debt sustainability in the face of contingent liabilities related to government-related entities and the still weak real estate market”.

The IMF officials also insisted the UAE to adopt “further deleveraging and strengthening of impaired GRE balance sheets, increased transparency, and improvements in corporate governance at GREs.”

“Banks lending to non-viable GREs constitutes a further risk to the banking sector,” the IMF said. But it welcomed the UAE central bank’s recent imposition of caps on lending to GREs.

The UAE central bank amended its regulations in April to restrict commercial bank lending to local emirates governments at GREs. The rules will come into force in September.

The IMF statement also took note of the continued rise in non-performing loans and higher provisioning by UAE banks and underlined that lending to the private sector remains sluggish due to fears of more possible debt roll-overs and excess capacity in the real estate sector.

“Despite increased non-performing loans, the UAE’s banking sector remained well-capitalized and profitable,” said the IMF.

“The recovery of the economy is continuing despite the uncertain global economic environment. High oil prices and increased production, strong growth in Asia, and the UAE’s perceived safe haven status in the context of the regional turmoil contributed to an estimated real GDP growth of 4.9% in 2011,” the IMF statement said.

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