In October, Moody’s Investors Service warned that Dubai may need help from Abu Dhabi to pay its debts. The city state is expected to need to refinance $15 billion in maturing loans this year. Abu Dhabi is one of the world’s largest sovereign wealth funds, with assets estimated at $875 billion. It has invested around the world, including purchasing a 75% stake in the Chrysler Building last summer at the height of oil prices.

Abu Dhabi stepped in to bail Dubai out

 

In a surprising move, the ruler of Abu Dhabi stepped in to bail out debt-ridden Dubai with a $10 billion bailout. The move lifted world markets, but it remains unclear if Dubai will ever fully recover. The aid will help the emirate pay off a maturing bond. The Nakheel bond, owned by state-owned Dubai World, is due to mature on Monday. The intervention by Abu Dhabi, the most powerful state in the United Arab Emirates, was intended to avoid a prolonged financial crisis and to provide Dubai with the funds to continue its rapid recovery.

Dubai had taken out a massive bond to diversify away from its oil supply, but the global financial crisis wiped out the majority of that debt. The resulting property crash caused a market crash that had drained the emirate’s liquidity. The news of the bailout has spurred a rally on the share market in the United Arab Emirates, with the Abu Dhabi Stock Exchange jumping nearly 10% on Wednesday. Meanwhile, the euro and pound both rose in value against the dollar.

Government of Dubai refinanced debt

 

The Government of Dubai has refinanced debt with the UAE central bank. The UAE has a large foreign debt balance that would have been manageable under normal conditions but has been blown out of proportion since the collapse of the international credit markets in mid-2008. The UAE has repeatedly argued that it will not let a quasi-public entity fails, despite the fact that it has accumulated a large amount of debt. In the article: refinansiere boliglån written by Finanza, you can read all about this.

The UAE central bank has agreed to refinance $20 billion in debt for the Government of Dubai. The deal will reduce the interest rate from 4% to one percent for a period of five years. This agreement should reassure investors and boost the UAE’s competitiveness.

Commercial banks must be majority-owned by UAE nationals

 

According to the Central Bank Law, all commercial banks in the UAE must be majority-owned by UAE nationals. Foreign ownership is limited to 40 percent for local banks and is subject to approval by regulators. Foreign banks are permitted up to eight local branches. These banks are not subject to income tax or emirate tax.

The UAE constitution forbids discrimination based on national origin, race, or religion. In addition, the UAE Labor Law provides national preference to Emirati citizens. UAE Federal Law 06 of 2020 stipulates equal pay for men and women in the private sector. The law came into force on September 2020. Additionally, the DIFC Employment Law No. 2 of 2019 addressed the issues of sick pay and paternity leave.

Interest rate increase affects savings accounts

 

The Central Bank of the UAE has raised its base rate by half a percentage point, to 2.25 per cent. The move follows the U.S. Federal Reserve’s third consecutive hike of interest rates. The UAE currency is pegged to the U.S. dollar, which means that any increase in rates will be reflected in equated monthly installments. As a result, the UAE bank’s savings accounts will see a corresponding rise in interest rates.

Despite the increase in interest rates, the changes in savings rates are not immediately visible to all borrowers. Those with fixed-rate home loans should not feel the effects of the new rate until the end of the fixed-rate period. However, borrowers with variable-rate home loans will feel the impact of the new rate when their next payment is due. The best three-year fixed rate currently stands at 3.49 per cent, while the lowest five-year variable rate is 2.35 per cent. Credit cards are particularly vulnerable to the increase in interest rates, with some of the highest interest rates exceeding 30 per cent a year.