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Dubai. The Dubai government disclaimed responsibility for the debts of its Dubai World conglomerate on Monday, effectively washing its hands of the woes facing the company and crushing earlier assumptions that the emirate would guarantee the company’s liabilities.

“Creditors need to take part of the responsibility for their decision to lend to the companies,” said Abdulrahman al-Saleh, director general of Dubai’s Department of Finance. “They think Dubai World is part of the government, which is not correct.”

United Arab Emirates stocks plunged on Monday as investors waited for clarity on Dubai’s request for a six-month delay on repaying billions of dollars in debt issued by Dubai World and its Nakheel unit, developer of three palm tree-shaped islands.

“The government is the owner of the company but, since its foundation, it was established that the company is not guaranteed by the government,” Saleh explained.

“It deals with all parties on this basis and it borrows based on its projects and not the guarantee of the government,” he said.

Saleh said market reaction to last Wednesday’s announcement by Dubai World, which initially shook global financial confidence, was exaggerated. “The restructuring is a wise decision that is in the interest of all parties in the long term but might bother creditors in the short term,” he said.

The “standstill” agreement will affect about $5.7 billion of debt due to mature by the end of May.The UAE central bank has promised more liquidity to local banks, but Saleh doubted it would be needed. “I think banks are not at a stage where they need any extra liquidity from the central bank,” he said.

It remains unclear whether there were any quick fixes that could ward off investors either withdrawing their money from UAE banks, let alone injecting new funds into the country.

“I don’t think there’s much the UAE can do at this point,’’ said Mohammed al-Ghussein, managing partner of Atlas Financial Services in Dubai. “There’s going to be a period where they sit still and let things calm down. I don’t think pumping a few billion dirhams here or there will do anything.’

Reuters