New Delhi: Union finance secretary Ashok Chawla said on Friday Dubai debt worries are unlikely to impact remittances from the region.
“I am not sure because the expats who are there, the remittances didn’t suffer during the period when the larger crisis was on,” Chawla told reporters when asked about the likely impact on remittances from Indian expats in the region.
“So whether this should have an impact in terms of employment, in terms of salaries, and therefore in terms of remittances, is somewhat unlikely,” he added.
Meanwhile, investors recoiled from risky assets on Friday and dumped shares in Asian banks and builders, fearing a Dubai debt default could reignite the financial turmoil of the credit crisis.
Stocks in Tokyo and Hong Kong were haunted by suspicion of lenders’ exposure to the Dubai firms that built palm-frond shaped islands in the Gulf and planned cities from Pakistan to Africa.
The emirate, which emerged from dusty obscurity to became a trading and tourism hub with global ambitions, said on Wednesday it would ask creditors of state-owned Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step towards restructuring.
Dubai World, the conglomerate that led the emirate’s expansion, had $59 billion of liabilities as of August, a large proportion of Dubai’s total debt of $80 billion. Nakheel was the builder of three palm shaped islands off Dubai.
The news shook markets that are recovering from the collapse of the US housing market and contagion that threatened to rupture the global financial system last year.
“The panic button’s been hit again,” said Francis Lun, general manager of Fulbright Securities.
Analysts expect financial support from Abu Dhabi, like Dubai a member of the United Arab Emirates and home to most of the emirates’ oil. But Dubai might have to abandon an economic model that focused on heavy real estate investment and inflows of foreign money and labour.