Dubai is in talks with banks for a possible Islamic bond sale, people familiar with the matter said, as it considers joining its Gulf neighbors in using public markets to fund a budget deficit, reports Bloomberg.
The emirate is also looking at other fundraising options, including a conventional bond sale, loan or private placement, the people said, asking not to be identified because the information is private. An Islamic bond, or sukuk, sale is the most likely option, the people said. A final decision hasn’t been made and the government may decide not to tap the market if conditions aren’t favorable.
Dubai is considering raising debt to help finance a budget deficit that may reach $680 million this year. Although the emirate’s economy relies mainly on tourism, retail and logistics rather than oil, it’s also been hit by a drop in energy prices. Dubai last sold a $750 million sukuk in 2014 and has a $600 million Islamic bond maturing in May, according to data compiled by Bloomberg.
The government is likely to come to the market soon once a final decision on the financing plans is made, and may raise as much as $1 billion in debt this year, the people said. No one at Dubai’s Department of Finance was available for comment.
Governments across the six-nation Gulf Cooperation Council are tapping capital markets after the price of oil, the region’s main source of income, slumped by more than half since 2014. Saudi Arabia raised $9 billion in its first dollar-denominated Islamic bond sale this month after selling a $17.5 billion bond in October, the biggest ever from an emerging-market nation. Qatar, Abu Dhabi, Oman and Bahrain have also raised billions of dollars from bond sales over the past year.