Determining how much debt Dubai’s government has amassed depends on who’s counting. What is less in dispute is that the uncertainty comes at a cost.
Unlike the government, Moody’s Investors Service and S&P Global Ratings include Dubai’s local bank borrowings to make the calculation, arriving at an estimate of about 290 billion dirhams ($79 billion). The debt burden could equal 77% of this year’s gross domestic product, according to S&P, comparable with what the International Monetary Fund predicts for South Africa and just behind Oman.
However, in the prospectus for its $2 billion bond sale this month, Dubai put its debt at 123.5 billion dirhams, a figure that leaves out what’s owed by the emirate’s government-related entities, or GREs.
“Moody’s and S&P are taking a broader and more conservative approach,” said Todd Schubert, Singapore-based head of fixed-income research at Bank of Singapore. “As investors, we certainly pay attention to what the rating companies think as we realize that other investors incorporate their views into their evaluations of the credit.”
Dubai’s Department of Finance declined to comment.
The discrepancy alone may not capture the extent of risks that might lurk off the balance sheet of the city, the second-wealthiest of the seven sheikhdoms that comprise the United Arab Emirates.
Most of Dubai’s GRE debt is issued by private and unrated entities, so there’s “limited visibility” over their financial performance, according to Thaddeus Best, a Dubai-based analyst at Moody’s. On top of the government’s own liabilities, Moody’s “conservatively” estimates the emirate’s non-financial public sector debt at $83 billion.