Office to keep close watch on debt

After Dubai's debt crisis last year, governments are taking steps to monitor and contain borrowing at the federal and emirate levels. Abu Dhabi is no exception. Dubai's total debt was estimated at more than US$100 billion (Dh367.3bn) last year. Now Abu Dhabi plans to open a debt management office to maintain borrowing "at prudent levels". The office, a unit of the Abu Dhabi Department of Finance, will vet large bank loans and bond sales by the Government and state-owned companies. It will also be a contact point with the Government for credit ratings agencies that estimate the likelihood of a borrower defaulting.

The office "is expected to include new issuances and risk management. The debt management office is also expected to co-ordinate the borrowing activities of government-owned and certain other government-related enterprises, and to ensure that their borrowing is maintained at prudent levels," according to a government-guaranteed bond prospectus released last week. The debt office plans follows similar moves in Dubai and federally.

The UAE Government said it was setting up a debt unit last September. Sheikh Ahmed bin Saeed Al Maktoum, the chairman of Emirates Airline, said in May Dubai planned to set up a similar debt management unit to centralise debt decision making. Debt is not yet at worrying levels in Abu Dhabi, which had $4.4bn of direct government debt at the end of April, the prospectus says, equal to about 3 per cent of last year's GDP.

Government-owned companies had an additional $22.1bn of debt, according to the prospectus. [e-mail]