DUBAI (Reuters) – United Arab Emirates’ banks have a positive view on Dubai World’s debt proposal, whose terms might improve, and credit growth is reasonable, the Gulf state’s central bank governor Sultan bin Nasser al-Suweidi said.
The UAE economy is expected to lag its Gulf peers this year as banks in the world’s third largest oil exporter remain reluctant to lend following a Dubai debt restructuring.
“Banks are finding the Dubai World proposal as very much agreeable,” Suweidi told reporters on the sidelines of a financial conference on Monday.
Dubai World sealed a deal to restructure $23.5 billion in debt with its core lenders last week, but it has yet to strike an agreement with remaining creditors.
Suweidi said the final outcome of the deal would have better terms as for the interest rate than proposed by the state-owned flagship conglomerate.
“The final outcome will be somewhat more acceptable than 1 percent,” he said.
Dubai World’s restructuring chief said last week that the firm can slightly increase the cash coupon offered to banks, depending on which option creditors choose.
Investors, worried about a lack of transparency, are fretting about a risk of more debt problems at Dubai-linked entities.
Speculation has centred on Dubai Holding — owned by the emirate’s ruler, Sheikh Mohammed bin Rashid al-Maktoum — which has about $10 billion in outstanding debt.
When asked about Dubai Holding potentially restructuring its debt Suweidi echoed his previous comments saying: “The worst is behind us.” He did not elaborate.
Suweidi also indicated he was not worried about slow credit growth in the OPEC member country.
“Our opinion is that, under the circumstances, it (credit) is growing at a reasonable rate,” Suweidi said.
Bank credit in the UAE grew 2.4 percent year-on-year in April, edging down marginally from March, while provisioning levels for non-performing loans rose to their highest level since at least December 2008.
Suweidi did not comment on 2010 growth prospects for the UAE, the second largest Arab economy after Saudi Arabia. Analysts polled by Reuters saw the UAE growing by 2.5 percent this year after an estimated contraction of 1.4 percent in 2009 .
Suweidi also said rejoining a planned Gulf Arab monetary union was off the table at the moment.
“This is an issue which is beyond discussion in the UAE,” he said.
The UAE pulled out of the project last year after losing its bid to host the joint central bank to Saudi Arabia, three years after Oman did the same.
The project, designed to emulate the euro zone, has been delayed by political disagreements in the region dominated by the Saudi kingdom, the world’s largest oil exporter. Remaining states pursuing the union include Kuwait, Qatar and Bahrain.