Debt-burdened Dubai has insisted that it took into account the effect its bid to delay paying creditors would have on world markets.

But it offered no specifics and did little to ease worries that hit trading for a second day.

Sheik Ahmed bin Saeed Al Maktoum, the chairman of Dubai’s Supreme Fiscal Committee, stressed that the call to defer for at least six months at least some of 60 billion dollars owed to creditors by Dubai World, the emirate’s chief investment arm, was “carefully planned” and aimed at taking decisive action.

But the announcement appeared to reinforce worries that Dubai’s rulers are fuelling a crisis of confidence from world markets with their policies of keeping tight control over information on their fiscal standing and deal making. The timing of the announcement worsened the concerns, since it came ahead of a three-day Islamic holiday.

Some analysts believe the Dubai debt mess could bring demands for more financial transparency from Dubai and across the Gulf, which has become a magnet for international investment in the past decade.

“It touched investors’ sensitive nerves,” said Cai Junyi, an analyst for Shanghai Securities. “The world is watching whether that will have any substantial impact … Dubai World is just like a small window that might reflect another financial tsunami.”

World markets reacted in shock to what some analysts indicated amounted to a default by Dubai World, the city-state’s key engine of growth with interests around the world ranging from ports to real estate.

Oil prices dropped and Asian stocks slumped for a second day but European stock markets appeared to be stabilising after a heavy sell-off that saw bank shares take a pounding over possible exposure to Dubai debt.

Ahmed’s statement came a day after the Dubai government announced a restructuring of Dubai World and said it would ask creditors to delay debt repayment until at least May.

The sharp reaction in equity markets worldwide apparently forced the taciturn rulers of Dubai to come forward with a bit more information. “Our intervention in Dubai World was carefully planned,” Ahmed said in the statement. “The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react.”

Source: AP

Related posts:

1. FTSE 100 rebounds as Dubai jitters ease
2. Dubai Hires Economic Advisers
3. Dubai in crisis: the questions and answers
4. Dubai tries to reassure investors after finance boss ousted