Dubai says it will not back debts

DUBAI&rsquo;S government will not guarantee the debts of Dubai World, the emirate&rsquo;s finance minister said yesterday, as the debt crisis sent shares in Abu Dhabi and Dubai plummeting.<br /><br />State-backed Dubai World sparked fears of a second global crisis last week when it asked for a freeze on repayments of its &pound;36bn debt.<br /><br />But comments made by the emirate&rsquo;s leading finance official yesterday did little to clarify Dubai&rsquo;s plans or shed light on how much investors stand to lose.<br /><br />Abdulrahman al-Saleh told Dubai Television: &ldquo;It is correct that the government owns Dubai World, but the decision when it was set up was that it should receive financing based on the viability of its projects, not on government guarantees.&rdquo;<br /><br />He added: &ldquo;Creditors need to take part of the responsibility for their decision to lend to the companies.&rdquo;<br /><br />Al-Saleh&rsquo;s comments came as a shock to those who have invested in Dubai on the assumption that the government would guarantee investments.<br /><br />The minister added that banks did not need extra liquidity and said the market reaction to the restructuring had been overblown.<br /><br />Vyas Jayabhanu, head of investments at broker Al Dhafra Financial, said: &ldquo;We still expect some action by the federal government eventually, otherwise it will ruin the economic sector.&rdquo;