The Government of Dubai has moved to protect its economy from a looming crisis of confidence by disclosing details of its previously secretive finances, merging and nationalising financial groups and putting the brakes on its property market.

Mohamed Alabbar, a member of Dubai's executive council and chairman of Emaar Properties, said yesterday that the emirate's borrowings were $10 billion (£6.6 billion) and that state-affiliated companies owed a further $70 billion. Dubai's GDP was 198 billion United Arab Emirates dirhams (£35.6billion), which means that the ratio of its debt to gross domestic product is 148 per cent, compared with 57 per cent in the United States, 40 per cent in Britain and 99 per cent in Japan. It equates to a per capita debt of about $40,000 per head if split among Dubai's two million population.

This was the first time that a member of the Government has confirmed the city-state's financial situation and it came as speculation has mounted that a heavily indebted Dubai would be forced to sell assets to Abu Dhabi, its rich neighbour, to prevent defaults.

Dubai has borrowed to finance its infrastructure and construction boom and companies such as Dubai World, which owns P&O ports, and Emirates Airline have accumulated large debts during a period of rapid growth.

Concern over the level of debt held by the Government and its affiliated companies has sent jitters throughout the Gulf region. Dubai's stock market is down 60 per cent this year and many residents believe that the property market is on the brink of collapse.

The Government of Dubai is seeking to calm nerves by publicly supporting its companies, banks and economy through measures that include opening up about the level of indebtedness.

Mr Alabbar said that Dubai's debt of $10 billion compared with sovereign assets of $90 billion while its companies owed $70 billion against assets of $270 billion. “The Government can and will meet all its obligations going forward,” he said. “Dubai's borrowing is not being used to cover expenditure or to provide subsistence, it is funding our long-term infrastructure development.”

Mr Alabbar, who was speaking at the Dubai International Financial Centre (DIFC) conference, added that the Government would support companies that got into financial difficulty because of the credit crisis. Mr Alabbar is head of a committee that has been set up to handle Dubai's response to the global economic crisis and his comments are effectively a government guarantee. On Sunday the committee forced through the merger of several struggling banks to maintain liquidity within the Dubai market. Tamweel and Amlak Finance, both mortgage lenders, UAE Real Estate and Emirates International have been merged into a single vehicle — the Emirates Development Bank.

The Government of the United Arab Emirates, the federation of seven states that includes Dubai, has agreed to invest in this new bank in order to stabilise its balance sheet. The intervention of the UAE Government is considered particularly significant in the Gulf as the individual emirates have traditionally been largely independent.

The UAE Government is dominated by Abu Dhabi, the richest of the emirates, and its involvement is thought to be a signal to worried banks and investors that the vast wealth of Abu Dhabi is now implicitly supporting Dubai.

Mr Alabbar also said that Dubai's largest companies would have to work together to find a way through the economic difficulties, particularly in the property sector.

Mr Alabbar's Emaar, which is building the Burj Dubai, the world's tallest building, will collaborate with Nakheel, which built the palm islands off the Dubai coast, and Dubai Holdings, the Government's property unit. The three companies control 70 per cent of Dubai's property development industry, but will be allowed to work together to limit supply and prevent the market from being flooded with new apartments.

Mr Alabbar said: “We have to recognise the reality on the ground and work differently. We have to collaborate and in time, in the future, we can be competitors again.”

There were calls at the DIFC conference for Arab nations to use their wealth to bargain for a more prominent position in global affairs. Western leaders have asked Arab nations to use their sovereign wealth funds to support the global economy and many in the Middle East believe that their countries should join an expanded G7 to reflect their greater contribution.

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