One of Dubai's top government officials said on Sunday he expected state-owned conglomerate Dubai World to reach a deal in the near future on renegotiating its debt repayment schedule. Sheikh Ahmed bin Saeed al-Maktoum, chairman of Dubai's Supreme Fiscal Committee, also dismissed concerns the emirate could overstretch itself again as it announces a raft of new construction projects.
But he added that Dubai would need to keep inflation under control if it was to remain an affordable place to live.
Dubai borrowed heavily during a boom period in the middle of the last decade, but then the global financial crisis and a local real estate crash in 2008 precipitated a number of restructurings at state-linked companies. These included Dubai World, which had to renegotiate obligations worth $25 billion.
A new debt schedule was agreed in 2011 for the conglomerate. However, earlier this year, Dubai World said it was looking to revise this plan so that a 2015 repayment would be returned to creditors early in exchange for more time to handle a larger tranche of cash due in 2018.
"I can say for sure we will reach it. It is there and you will hear about it soon," Sheikh Ahmed told reporters on the sidelines of a real estate event, when asked whether Dubai World had reached a deal with its creditors.
Dubai World is offering creditors a series of incentives to lengthen its debt restructuring deal, including shares in global ports firm DP World as collateral, sources told Reuters earlier this month.
The company has secured agreement with a creditor committee including HSBC and Emirates NBD and is now holding talks on the deal with some other lenders to create a groundswell of backing before approaching the full bank group, the sources said.
Dubai's economy has rebounded over the last two years, with its property sector and stock market making up ground lost when the prices of both plummeted after 2008.
Returning confidence has led to a number of ambitious new projects to be announced, including plans to build the world's largest Ferris wheel and the world's largest shopping mall.
While too much leverage was a major problem for Dubai and its state-linked entities during the previous boom, the current revival would be different, Sheikh Ahmed said.
"These (new) projects have nothing to do with Dubai's debt programme. These are investors who will be taking their own risks."
Sheikh Ahmed, who is the uncle of Dubai's ruler Sheikh Mohammed bin Rashid al-Maktoum, added that many of the new residential projects which have been announced were needed to help boost supply and dampen big increases seen in prices.
Property price rises, at close to 30 percent year-on-year, were among the highest in the world during 2013 and the first part of 2014, causing many - including the United Arab Emirates central bank - to worry about an overheating market.
"We are really trying to control the inflation rate. We don't want it to be so high as we believe Dubai will continue to attract more and more people," he said.
"As you can see, rents are shooting up. If these projects don't come up, demand will exceed supply and this is not what we want to see," Sheikh Ahmed added.
Inflation in Dubai hit a five-year high of 3.5 percent in August, the emirate's statistics centre said.
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