The Sultan's new clothes

The fable of the Emperor's new clothes is the theme here.

Guambat has tried to develop the plot line in previous posts that the real breakdown in the Dubai World meltdown is not the liquidity or support provided by UAE, and Abu Dhabi in particular, but the emerging realization that much of modern Islamic finance is structured in ways that only resemble Western bond finance, when, in truth, its structural features are untested by Western legal precepts of financial fault, particularly bankruptcy.

So, now, from plot line to punch line:

IMF cites Dubai debt in trimming its outlook

The debt restructuring at Dubai World will hit economic growth next year, the IMF said, as credit rating agencies downgraded more Dubai companies.

“Our anticipation is that there will be a significant reduction in that growth rate, down from 3 per cent, probably somewhere between 1 per cent and 3 per cent,” said Masood Ahmed, the director for the IMF’s Middle East and Central Asia department.

“Dubai World’s debts do not affect the economic performance of Dubai or the UAE, and it is a matter of time before the company restructures its debts and honours its commitments as per a scheduled plan,” said Sultan al Mansouri, the Minister of Economy.

The Future of Islamic Finance