Is Dubai facing widespread default on major debt?
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Dubai is the jewel of the Arabian peninsula, the region’s financial capital and a city of global importance. Exorbitant wealth has become something like a national sport there, and major institutions there took the position that they could outlast the global financial panic without substantial government intervention.
Now, Dubai World, the massive state-owned firm, is requesting time from its creditors to restructure. The news has raised fears Dubai itself may be running out of money and overly dependent on financial exotics and commodities whose long-term financial value cannot be relied on. Is Dubai going bankrupt? And if so, will the emirate receive assistance from external creditors who might be able to prevent default?
It is estimated that $300 billion worth of major investment and construction projects (roughly 400 in total) have been canceled due to the credit crisis. Where will the capital come from to cover the $60 billion Dubai World must repay and after that Dubai’s own rapidly increasing fiscal imbalance?
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