UNITED ARAB EMIRATES:THE UNITED Arab Emirates intervened yesterday to shore up increasingly fragile confidence in the oil-rich Arab Gulf's business hub and prevent contagion from the US spreading to one of the world's fastest growing regions.
The government said it would guarantee bank deposits and savings in the UAE's national banks, as well as all interbank lending, and inject as much liquidity into the system as necessary.
Saudi Arabia, the Arab world's largest economy, also said it would make SAR150 billion (€30 billion) available to its banks if required.
Just a few weeks ago western bankers were lining up in the Gulf in an attempt to raise rescue financing for ailing institutions. But officials now concede the oil-rich region faces its biggest challenge since the Iraqi invasion of Kuwait in 1990.
The UAE's steps were designed to reassure depositors and investors who have taken fright amid tumbling stock markets, a domestic liquidity crunch and concerns about Dubai's real estate market.
Rating agency Moody's will today highlight the vulnerability of Dubai in a report that estimates the debt level at close to $50 billion (€37 billion), more than the emirate's 2006 gross domestic product, and will continue growing for at least the next five years.
Dubai has a diversified service economy but little oil wealth. Moody's believes that Abu Dhabi, the capital and home to more than 90 per cent of the UAE's hydrocarbon reserves, would bail out the smaller emirates if necessary.
The federal government's statement made clear that all of the nation's seven semi-autonomous emirates would stand together to confront the global crisis.
The government released its statement shortly before the markets closed yesterday. The Dubai financial market and the Abu Dhabi securities exchange were down 5.4 per cent and 2.3 per cent respectively. - ( Financial Times service)
