Thursday, May 17, 2012

DUBAI (Zawya Dow Jones)--Government-related companies in the United Arab Emirates have to repay $30 billion of maturing loans this year and face a "significant" amount of debt falling due in 2014 and 2015, the International Monetary Fund said.

Several government-related entities are still restructuring their debts and their "indebtedness, refinancing needs and reliance on foreign funding remain high," the IMF said in a statement following the conclusion of its regular Article IV consultations with the U.A.E.

Dubai has been struggling with a massive debt burden after Dubai World came close to defaulting on its debt in 2009. Last year, Dubai World completed a $25 billion debt restructuring. Several Abu Dhabi GREs have also build up substantial debts.

The IMF reiterated that the U.A.E. should adopt "further deleveraging and strengthening of impaired GRE balance sheets, increased transparency, and improvements in corporate governance at GREs."

Banks lending to non-viable GREs constitutes a further risk to the banking sector, the IMF said. But it welcomed the U.A.E. central bank's recent imposition of caps on lending to GREs.

In April, the U.A.E. central bank amended its regulations to restrict commercial bank lending to the local emirates governments at to the GREs. Banks need to comply with the new rules by September, the central bank said.

In its statement, the IMF also noted a continued rise in non-performing loans and higher provisioning by U.A.E. banks. Banks' lending to the private sector remains sluggish, curbed by fears of more possible debt roll-overs and by excess capacity in the real estate sector.

Despite increased non-performing loans, the U.A.E.'s banking sector remained well-capitalized and profitable, said the IMF.

It recommended the development of a domestic debt market in the U.A.E., which would support banks' liquidity management in preparation for the introduction of the Basel III liquidity requirements.

-By Leila Hatoum, Dow Jones Newswires; +971-4-446-1686; leila.hatoum@dowjones.com

Copyright (c) 2012 Dow Jones & Co.

(END) Dow Jones Newswires

17-05-12 0711GMT