Dubai Government Will Not Back Debts of Troubled Investment Firm
Dubai Government Will Not Back Debts of Troubled Investment Firm

A top finance official in Dubai says the emirate's government will not guarantee the debts of the heavily-indebted, state-owned conglomerate Dubai World.

Stock markets in Dubai and other parts of the United Arab Emirates plunged Monday, with investors concerned about Dubai's ability to pay back $59 billion in debt.

The Dubai market dropped 7.3 percent while Abu Dhabi's index tumbled 8.3 percent.

The director general of Dubai's Finance Department, Abdulrahman al-Saleh, says lenders bear some responsibility for the current crisis.

He says they lent money based on their assessment of the firm's projects, not because of government guarantees.

The official says while Dubai owns Dubai World, it has been known since the conglomerate was established that it was independent and not guaranteed by the government.

The debts grew out of Dubai's property boom, which included unique projects like palm-tree shaped islands and work on the world's tallest building.  The once rapidly growing city-state has been hit hard by the global financial crisis. 

The UAE stock exchanges opened Monday for the first time since Dubai World asked last week to delay debt repayments by six months.  The markets had been closed for the four-day Muslim holiday of Eid al-Adha.

On Sunday, the UAE's Central Bank said it would make more loan money available to its banking sector in an effort to ease the crisis.

World stock markets dropped last week as investors worried the Dubai credit crisis could affect emerging economies and major banks with loans to the Gulf state. 

Some information for this report was provided by AP, AFP and Reuters.