Published February 24, 2009

Dubai raises US$10b from UAE central bank

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(DUBAI) Dubai's finance department said on Sunday that it sold US$10 billion in bonds to the United Arab Emirates' central bank, alleviating some concern about the Gulf city-state's finances, hit hard in the global financial crisis.

With the sale, the department said it will have 'the necessary liquidity' to compensate for global funding sources that have dried up over the past year.

The funding agreement is part of a US$20 billion long-term bond programme launched on Sunday.

The bonds carry a 4 per cent annual interest rate and mature in five years.

'This programme will secure the necessary funding for Dubai to meet its financial obligations and continue its development programme,' the emirate said in a statement.

Analysts have speculated for months that the federal government, located in oil-rich Abu Dhabi, might need to help debt-ridden Dubai, which is one of seven emirates that make up the UAE. The need for funding has taken on increased urgency as the cost to insure Dubai's debt grew more expensive in recent months.

State news agency WAM, based in Abu Dhabi, also reported the financing arrangement. Officials were not immediately available for comment.

The financial crisis finally caught up with fast-growing Dubai's financial and runaway real estate sector late last year. The slump has forced several of Dubai's numerous state-controlled companies to shed jobs, shelve projects and rein in costs.

Although the UAE is one of the world's biggest oil exporters, Dubai has relatively little crude and relied heavily on credit to fuel its boom.

Credit rating agency Moody's Investors Service warned earlier this month that it might cut its ratings for some of Dubai's most prominent state-backed companies and renewed questions about the scope of the emirate's finances, putting added pressure on the government to act. -- AP