Expo 2020 Bidding Boosts Dubai Spending, Sukuk Inssuance

by on November 28, 2013 4:45 am BST

Dubai sets the stage for the Expo 2020 with sales of sukuk financing the building of infrastructure for the grand affair. Dubai, the second-wealthiest member of the United Arab Emirates, is one of four cities in bidding for the Expo. If Dubai wins, it would be the first time the even was held in the North African/Middle Eastern region.

In an attempt to lure the Expo, Dubai has spent nearly six billion euros on infrastructure, said Shiekh Ahmed bin Saeed Al maktoum, head of Dubai’s Supreme Fiscal Committee. If the Expo is award to Dubai, it is expected that the sale of sukuk will increase in order to pay for the growth expansion. “Raising funds would require the right financial structures and, in my mind, capital market transactions, bonds or sukuk will see a surge. The way the wind is blowing, sukuk may be the preferred route,” said Adnan Chilwan, CEO of Dubai Islamic Bank.

The Expo could bring 6.4 percent in growth expansion over the next three years, according to Barclays PLC. The emirate would incorporate five billion dirham expenditure for increasing their metro network, as well as building a exhibition center with themed pavilions.

Winning the Expo could boost Dubai’s economic growth to 6.4 percent over the next three years, Barclays said in a research note yesterday.

However, the dramatic increases in spending could further caused public debt accumulation. The yields on Dubai’s 2022 bond increased 49 bps to 4.81 percent. The 10Y treasury increased 96 bps to 2.72 percent. Credit default swaps dropped to 217 bps from 445 at the end of 2011.

In 2009, Dubai requested a delayed $25 billion in debt repayments.