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28 March 2024

Dubai says no plan for more bonds

Investor confidence in the emirate is growing. (FILE)

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By Staff

Dubai has no plans to issue more bonds in the near future after it raised $1.25 billion this week and the bulk of the funds would be used to finance airport expansions, according to a senior finance official.

Abdulrahman Al Saleh, Director General of Dubai’s Department of Finance, said the emirate’s budget recorded a deficit because it needed to push ahead with major infrastructure projects, mainly airport expansions.

In an interview with Dubai’s state television broadcast Friday night, Saleh said the Dubai government issued bonds this week not under any pressure but to bolster the emirate’s financial position in the world.

“Dubai has not plans to issue more bonds in the near future because available resources and operating revenue are currently sufficient and achieve the required goals whether for operation expenses or capital expenditure,” he said.

“When we issued bonds this week, it was not under great pressure of resources but to consolidate the emirate’s financial position in global markets….we chose to issue bonds in global markets to maintain our relationship with world investors.”

Saleh said the strong demand for such bonds was a clear “response to all those who have doubted Dubai’s ability to deal with investors and enter the global market,” adding that the government was confident of the success of the issue.

He said the bond issue was in line with a detailed plan chalked out early this year and included a visit by a government delegation to some countries in Europe and Asia to meet investors and talk to them “face to face” about Dubai’s successes.

Saleh said the issue was oversubscribed by four times and it attracted more than 360 investment applications, over half of which were for the second part of the issue, with a value of $725 million and interest of 7.75 per cent for 10 years.

The first $500-million part attracted nearly 170 applications and the new thing in this issue is the “strong demand from Asian investors,” Saleh said.

“These investors accounted for nearly 35 per cent of the total compared with 30 per cent for European investors and 30 per cent for the Middle East.”

Saleh said the money raised would be used in funding infrastructure projects, particularly “the most important and strategic airport expansion project.”

“This includes the expansion of the Dubai International airport or the Maktoum Airport…we consider the aviation sector as one of the main pillars of Dubai’s economy…despite the repercussions of the global economic crisis, it continued to record good growth levels,” he said

Asked about the budget deficit of Dh5.99 billion, Saleh said Dubai could have approved a surplus budget and stopped most infrastructure projects.

“But we opted for a budget with a deficit because we believe in the importance of completing all infrastructure projects, including airports and the metro….completion of such projects is the best strategic option for us in the long term because they constitute a strong pillar for our economy in the future.”

Saleh said he expected government expenditure to record “a sharp decline after the completion of those projects this year or in 2011.”

“This will consolidate the budget position and allow the government to develop new facilities in the future,” he added.