Dubai repaid $500 million in bonds due on Tuesday in what the government said was a sign of fiscal stability despite the coronavirus-driven economic downturn.
A bond repayment is generally a normal course of business for governments and companies.
But the Middle East trade and tourism hub has some history when it comes to debt, having overcome a debt crisis in 2009 thanks to a bailout from wealthier United Arab Emirates member Abu Dhabi.
More recently, opacity around its total levels of debt has created some disquiet among investors after last year’s pandemic hurt vital sectors of the economy.
“The Government of Dubai’s ability to fulfil its financial obligations reflects its deep fiscal stability amidst the circumstances imposed by the current global crisis,” Abdulrahman Saleh Al Saleh, Director General of the department of finance, said in a statement.
The $500 million notes, which were issued in 2011, have been redeemed in full, said the government.
Dubai was hit hard by the coronavirus outbreak, which hurt its key tourism, real estate, and trade sectors. S&P Global Ratings has estimated the economy shrank by 10.8% last year and that gross domestic product in dollar terms will return to pre-pandemic levels only in 2023.
While the government said last year its debt levels were equivalent to around 28% of 2019 gross domestic product, that figure goes up to over 100% of GDP, according to estimates by research firms and ratings agencies, if debt raised by government-related entities is also taken into consideration.
London Based Capital Economics has estimated that before the end of 2024 $38 billion of Dubai government-related debt is due for repayment, much of it in 2023.
The government said on Tuesday Dubai was now in a solid phase of economic recovery.
“The government’s solvency has allowed it to fulfill its past and current obligations and will continue to enable it to meet all future obligations on time,” Saleh said.