DUBAI: The Dubai government has established a debt management office and appointed Rashid Ali bin Obood Al-Falasi as its chief executive, in a move analysts say will streamline debt issuance and improve transparency.
The DMO will manage the sovereign debt portfolio and will be responsible for meeting the government’s financing requirements, the government said in its statement on Tuesday.
Bankers say the move to set up a DMO will help attract debt investors like global money managers in a region where public markets dwarf equity markets.
“We see this as another positive move to strengthen the fiscal framework, alongside the measures to deepen government revenue. Improved transparency and a debt management strategy could also potentially help reduce the cost of raising debt,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
Dubai returned to the public market in 2020, raising $2 billion in bonds, amid an economic downturn in the wake of the coronavirus pandemic.
The downturn has revived concerns over Dubai’s finances and revived memories of the 2009 debt crisis that shook its economy. That crisis caused Dubai’s real estate market to crash, threatening to force some state-linked companies to default on billions of dollars of debt.
International Monetary Fund data suggests Dubai's government debt is around $49.4 billion, but if state-linked entities’ debt is included that figure would expand to about $153 billion.
“The accompanying comments with the announcement suggest that the DMO will only handle the sovereign debt, which would continue to suggest that the debts of the government-related entities are outside of the DMO’s remit and these are the debts where we hold greater concern,” said James Swanston of Capital Economics.
The creation of a DMO has been “a demand by the financial sector for a long time to try to assess better the debt requirements of Dubai and its overall total liabilities against its assets distributed under various bodies,” said Mohammed Ali Yasin, a veteran UAE investment manager.
“It should also, theoretically, help create a better yield borrowing curve with the centralization of debt and the higher transparency,” Yasin said.
