Abu Dhabi agrees to refinance $20 billion of Dubai loans
DUBAI - Oil-rich Abu Dhabi and the UAE central bank agreed Sunday to extend the period of loans worth $20 billion accorded neighbouring Dubai when it was hit by the global financial crisis in 2009.
The government of Abu Dhabi agreed to roll over a loan of $10 billion for a renewable five years, WAM state news agency said.
The Abu Dhabi-based central bank of the UAE federation at the same time renewed subscription to Dubai bonds worth $10 billion for five years, it said.
The loans, that were due this year, will have an interest rate of one percent, WAM said.
Dubai sent jitters through global financial markets in autumn 2009 when it signalled problems in servicing mountains of debt owed by its government-related companies.
The once rapidly booming economy of Dubai was hit hard by the world financial crisis, which turned off the tap on easily available foreign finance, leaving many of its companies high and dry with a heavy debt burden.
But with the help of deep-pocketed Abu Dhabi, and following long talks with lenders, Dubai managed to restructure most of the debt.
The economy of the glitzy emirate has since made a strong comeback, banking on its core sectors of trade, tourism and transport.