Shadow of Credit Crunch Lingers

Dubai’s starting to recover from the its old debt fiasco, but the local legislators and rating agencies are still not taking the risk on reopening its doors to Arabia Gulf’s cheap credit lending.

The current bad debt liabilities of the United Arab Emirates currently totals at Dh1.7 billion, that is $16.79 billion in the US currency this is according to the data of the Central Bank. The financial institution is currently strengthening its early-warning systems to avoid repeating the same economic problems from arising.

Standard & Poor ratings agency has already added the number of their employees in the Dubai. Other financial institutions are now calling for more qualified credit analysts to aid them with their jobs.

The Arabian Gulf has incurred a $26.1bn worth of bonds that has contributed to the growing demand for credit ratings. Maijid Al Futtaim Holding and other similar companies are now trying to take baby-steps into the Islamic industry’s bonds.

According to the S&P’s regional managing director, Stuart Anderson, the company is currently trying to increase the number of workers that they are sending out from Europe. They have also sent out many analysts from different countries such as Paris, London and Frankfurt. The number of workers they had in their branch based at Dubai only involved three people in 2007, but has increased to over 24 employees in the beginning of this year. Most of these workers are ratings specialists.

The ratings agencies are also giving out hazard signals that the number of uncollected debts is still not clear indications of the financial reality. There could still be a hidden warning though about these accounts if they remain unsolved.

Ratings agencies such as S&P and Moody’s Investors Service, have been giving out these warnings of the reemergence of a global economic crisis from renegotiated problem loans. The Central Bank however has taken effort to protect the UAE banks from the financial shocks that may occur these past few months, as they try their best to regulate the flow of the cash.

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