RIYADH, Saudi Arabia — Dubai’s stock market rallied Monday, a day after the United Arab Emirates announced a $10 billion bond purchase to shore up the debt-ridden city-state, which had been hit hard by collapsing real estate prices and tight credit in recent months.
The Dubai government issued a statement on Sunday saying that it would issue $20 billion in long-term bonds, and that the Emirates’ central bank, based in Abu Dhabi, had agreed to buy the first installment of $10 billion.
Analysts had long predicted that oil-rich Abu Dhabi might bail out its neighbor emirate Dubai, whose economy is based largely on real estate and has suffered far more than Abu Dhabi has in the current downturn.
Dubai, which had financed its growth largely through international borrowing, said Sunday that the bond sale would allow it to “meet its financial obligations and continue its development program.”
But the bond program may be only a temporary fix for Dubai, where scores of major construction programs, including one planned to be the world’s tallest building, have been put on hold. Many foreign workers, who make up about 90 percent of Dubai’s population, have lost their jobs and left, and real estate prices have dropped by 50 percent or more.