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28 February 2024

UAE business leaders welcome $20 billion bond programme

Business leaders say the move will bring back liquidity into Dubai's market. (REUTERS)

By Staff Writer

Business and financial leaders believe the launch of $20 billion (Dh73.4bn) long-term bond programme by Dubai Government reflects the UAE economy's high-level of credibility and buries once and for all the charges surrounding the government's ability to live up to its financial commitments.

They said Dubai is highly dynamic and it is capable of surmounting any economic crisis.

They praised the UAE Central Bank for taking the step to fully subscribe half of the total bond. They said by taking such a move the Central Bank wanted to send a clear message to all doubting Thomasses that the protection of the UAE national economy was paramount and there would never be any discriminate against any emirate.

Some business leaders believe local governments and local and foreign banks would subscribe the remaining half to make the whole initiative a great success.

They said the fixed interest rate on each paper is close to the one fixed on US Government bond and this shows that the risk rate of Dubai's bonds is comparatively lower.

They therefore expect this move to reflect positively on local bourses and banks in the shortest possible time.

Government of Dubai launched a $20bn bond programme on Sunday to meet its financial obligations and press ahead with development projects. The first issuance of $10bn was fully subscribed by the UAE Central Bank. The bond is an unsecured fixed rate paper yielding four per cent per annum and has a five-year maturity.

This issuance will provide Dubai Government with the necessary liquidity to substitute the liquidity that has dried up globally in the past 12 months or so and accordingly meet all upcoming financial obligations that are needed by the administration. All agreed that the Dubai Government move was timely and a step in the right direction as it reflects the strength of the emirate's economy and its ability to continue to honour all its obligations and commitments.

Saeed Al Kindi, a businessman, welcomed the decision of Dubai Government. He said this move will play a big role in providing liquidity for some sectors, such as property developers and government-owned companies. In addition, it will help consolidate confidence in all investment sectors and remove fear among people.

Abdul Latif Al Sayegh, CEO, Arab Media Group, said: "I am not surprised at all. People who have been in Dubai for long know that there'll always be a solution and Dubai Government has, as expected, come up with a solution that is lasting and has created a positive vibe in the market. The announcement of the $20bn bond has induced positivity in the market, stocks have performed well and those who doubted the capability of Dubai have been silenced, once again.

"Now it's up to the market, establishments and organisations to take advantage of this financial boost to Dubai and be pro-active to face the current global crisis with courage and confidence," he added.

Abdullatif Al Mulla, CEO, Tecom Investments, said: "The launch of the long-term bond programme reflects the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, and his approach in taking the initiative to face difficulties and handle events with wise measures in the interests of the nation."

Faisal Al Bannai, Chief Executive, Axiom Telecom, said there was a lot of speculation and doubts about the resources of the Dubai Government and its ability to meet its commitments. This move has put all such speculation to rest. Dubai has always been resourceful about finding ways to address challenges; this is one of those examples. While the whole world gropes for a way to deal with economic crisis and lack of liquidity, Dubai has shown the way. This also speaks volumes about the strength of the UAE economy and the nation's unity at times of challenges. The bond issue will reinforce Dubai's ability to cope under any circumstances.

The five-year period of the bond means that the crisis will long be over before the bond matures. This is a well-conceived long-range plan to overcome short-term hurdles.

Farhan Faraidooni, Executive Chairman, Sama Dubai, said: "The issuance of the bond is a positive step for Dubai and will instill confidence in the economy. Besides, master developers, I believe, will be a lot more relieved by such a move as we could see the government injecting funds into the real estate sector. "Further, the injection of liquidity into the market will once again lubricate the supply chain and restart the economic growth in the emirate. It is certainly a big relief for all the sectors, especially for banks, who had stopped lending to master developers, getting an assurance that Dubai companies will fulfil their debt commitments for the year," Faraidooni said.

Salaam Al Shaksy, Chief Executive Officer, Dubai Bank, praised the bond issued by Dubai Government, saying that "(The issue) will serve as a springboard for the acceleration of economic activity and restoring global confidence in the overall economic stability and growth outlook of the emirate. It is an important step, which is in line with the long-term financing strategy of Dubai Government. The subscription of the UAE Central Bank to the first issuance of $10bn is also a clear demonstration of the UAE's unified and timely response to the global financial crisis and its ability and resolve to overcome the challenges it is currently facing. At Dubai Bank we offer our fullest support to this initiative and are confident that it will have a significant impact," Al Shaksy added.

Sheikh Nasser Al Mualla, Chief Executive, Bank of Umm Al Quwain, said: "The launch of the bond programme "is a clear message to the sceptics who try to divide the UAE into seven emirates. These bonds show the UAE is one country under one government."

Dr Ahmed Al Banna, an economist, said: "The launch of the bonds programme to cover part of financial commitments and provide necessary liquidity is one of the required steps to meet the emirate's development requirements. The Central Bank's subscription of the first $10 billion tranche shows the success of the programme. I am sure those who are in charge of the programme studied all available alternatives and found that the bonds programme was a correct step to support Dubai Government's developmental initiatives, especially at this critical period in which the world is suffering from the shortage of liquidity."

Habib Fekih, President, Airbus Middle East, said: "We are confident about the future of Dubai. The government's move to launch a bond is just a confirmation of our optimism. This will boost additional projects. Airbus, for instance, has been in discussions with Dubai for potential joint ventures in different fields of aviation. This move gives us further belief to explore those."