**Dubai’s government has announced it has been given a $10bn (£6.13bn) handout from United Arab Emirates neighbour Abu Dhabi to help it pay off its debts.**It will use $4.1bn (£2.5bn) of the money to bail out the government-owned investment company Dubai World.
The company’s property development operation Nakheel needed the money to pay investors in an Islamic bond due to mature on Monday.
Dubai has been badly hit by the global downturn.
The money from Abu Dhabi will be used to help the country meet its short-term financial commitments.
The payment due on Monday is an Islamic or sukuk bond, designed to be compliant with Islamic law which prohibits interest payments.
‘Satisfy obligations’
There had been fears the Nakheel would not be able to pay off the bonds when they matured and analysts say Abu Dhabi’s bailout was surprising.
On 25 November, Dubai’s government had said it would ask its creditors for a freeze on Dubai World’s $26bn (£16bn) debt repayments.
But in a statement on Monday the chairman of Dubai’s Supreme Fiscal Committee Sheikh Ahmed bin Saaed al-Maktoum said: “The government of Abu Dhabi has agreed to fund $10bn to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World.”
He added: “We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices.”
He also announced the implementation of new bankruptcy law.
“This law will be available should Dubai World and its subsidiaries be unable to achieve an acceptable restructuring of its remaining obligations,” he said.
The news had an immediate effect on the financial markets, with Asian bourses rebounding, and the US dollar and the euro rising against the yen.