The central bank of the United Arab Emirates announced Sunday that it would provide liquidity to banks, signaling a push by the federal government to inspire confidence to investors anxious over the nation's banking sector and its exposure to Dubai's humongous debt.

According to the Houston Chronicle, "global equity markets were set to reopen Monday, and investors are worried about a routing similar to that seen last week after Dubai's chief engine for growth, Dubai World, announced it wanted more time to pay some of its roughly $60 billion in debts."

The WAM news agency, UAE government-sponsored, revealed that the central bank issued to Emirati and foreign banks with branches in the nation claiming it would make available "a special additional liquidity facility linked to their present accounts at the central bank. The statement claimed the facility can be drawn upon at a rae of 50 basis points - above the three-month Emirates interbank offered rate.

On Wednesday, international investors responded with shock and outrage at Dubai World, since as part of its restructuring effort, it would ask creditors to delay repayment of its debt as well as that of its real estate arm, Nakheel, until at least May of next year. Nakheel must contend with a $3.5 billion bond in December.

As reported by the Chronicle, "the company's roughly $60 billion in debt makes up the brunt of the at least $80 billion Dubai owes as a result of a meteoric decade-long growth boom that saw the tiny city-state transformed into a Middle Eastern Las Vegas, New York and Los Angeles all wrapped into one. Dubai World was a key driver of that growth, with interests ranging from ports to real estate."

In the days after the announcement, Dubai officials have visited neighboring Abu Dhabi, the oil-rich home to the federal government for a series of conferences. Some observers have speculated that the timing of Dubai World announcement - on the eve of a three-day Islamic holiday - caught even the Abu Dhabi's rulers in surprise, placing them under pressure to act decisively in a bid to inspire confidence in the nation's banks.

To read the entire article from the Houston Chronicle, link here:

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