Ratings agency warns that short-term borrowing terms could stretch emirate's ability to repay

Dubai's mountain of debt means it will have to repay $50bn (£31bn) by 2012, ratings agency Standard & Poor's (S&P) has warned.

The accumulative amount of money the emirate's government-related entities (GRE) will have to repay in three years' time equates to around 70% of Dubai's current estimated GDP.

The ratings agency said Dubai's GREs owe between $80bn and $90bn (£49bn-£55bn) and that most of this has been borrowed over a relatively short term, meaning $50bn of it will be due in 2011 and 2012.

Weighing up the chances of the debt being successfully repaid, S&P said the track record of government general support for GREs was a positive sign. But it warned that the track record on helping GREs pay down debt specifically was less established.

S&P credit analyst Farouk Soussa said: "We see a long track record of on-going government support to Dubai-based GREs in the form of land grants, provision of bespoke infrastructure to support projects, and the like.

“However, in terms of extraordinary support to GREs to help them avoid financial distress, the track record is much shorter, in our observations, given the relative health of the Dubai economy and the ease of obtaining market financing prior to mid-2008.

“That said, there have been several instances of extraordinary government support in the past year."

Dubai secured a $20bn bailout from the UAE government in Abu Dhabi in March in the form of a bond, the first tranche of which has been delivered, with the second $10bn due imminently.

The UAE building boom began to falter a year ago and 566 projects in the country are on hold, according to research firm Proleads. In August, Building reported that Dubai's main arbitration body was facing a backlog of almost £3bn of disputes.