Dubai recieves 8 billion dollars in finance from Citi

Citigroup Incorporated has arranged more than $8 billion (Dh29.3 billion) finance for various Dubai government entities in recent months, the global banking group said.

“This is in line with our commitment to the UAE market in general, and reflects our positive outlook on Dubai in particular,” said Citi’s chairman, Sir Win Bischoff in a statement.

Officials familiar with Citi’s recent deals with Dubai entities said the amount is an aggregate of about half a dozen deals Citi did with Dubai’s public sector entities during the past few months.

“We continue to place the Gulf region among our globally most significant markets, and we certainly see opportunities across all of the UAE’s financial sectors. In the last 2 years, we’ve participated in most major financing transactions across the region including the UAE,” Bischoff said.

Citi’s renewed commitment comes amidst speculation on Dubai’s sovereign debt obligations, and Dubai’s debt to GDP ratio is an unsustainable 148%. Late last month Mohammad Al Abbar, chairman of the Advisory Council of Dubai’s government and chairman of Emaar Properties, stressed that the government was capable of meeting all its obligations, despite the fact that Abu Dhabi had taken over both major lenders in the country, and Dubai has also had to borrow an unspecified amount of capital from her bigger, oil-rich sister.

According to the council’s estimates, the government’s sovereign debt stood at $10 billion, while its assets, excluding key infrastructure installations were more than $90 billion. Although, I find it hard to consider a sewage system as an “asset.”

The total debt of government-affiliated companies is estimated at $70 billion, while assets are valued at $260 billion. Realistically, these assets are all but impossible to value, and the government seems to be pulling figures out of a magician’s hat.

While the government has clarified its ability to meet all its debt obligations, analysts view the renewed support by international financial houses as a strong vote of confidence in Dubai’s financial strength despite the global financial turmoil.

“We are quite positive about the UAE’s prospects and Dubai in particular as one of the world’s fastest growing international financial centers.

“This is evident in our decision to move our headquarters for the region to Dubai, and to strengthen our regional coverage teams through key appointments based at the DIFC,” said Mohammad Al Shroogi, Citi’s UAE chief executive and managing director for the Middle East.

Personally, I think this is a case of good money after bad, and it will be years before Dubai becomes an attractive destination for the smaller investor unless something is done to bring some sort of transparency to the Dubai property market.