DUBAI, United Arab Emirates -- Dubai has reached an agreement with Abu Dhabi and the United Arab Emirates' central bank to extend repayment of $20 billion of debt it incurred in the lead up to the global financial crisis, the country's official news agency reported Sunday.
Dubai built up more than $100 billion of dollars in debt to local and international lenders during a rapid building boom that turned the Arabian city from a fishing village into a bustling global business hub with a skyline full of modern skyscrapers. Despite its ambitious plans to keep growing and building, Dubai struggled to repay its loans as the global financial crisis battered its economy and property market.
Dubai is one of seven emirates in the UAE, whose economy is forecast to grow by around 4.5 percent this year. Abu Dhabi is home to nearly all of the 42-year-old federation's vast oil reserves and much of its wealth.
The UAE's official WAM news agency reported that the latest deal gives Dubai five more years to repay the debt at a fixed interest rate of 1 percent. The term is renewable.
The debt consists of a $10 billion loan from the oil-rich emirate of Abu Dhabi, which is also the UAE's capital city, and another $10 billion in central bank bonds.
WAM reported that the agreements are part of "continued efforts to boost the competitiveness of the U.A.E. economy on both regional and international levels."
Dubai has made considerable progress in sorting out its financial crisis since 2009. Mega projects that were either put on hold, significantly slowed or not initiated during the financial crisis are coming back to life again.
Many of Dubai's state-linked companies remain heavily indebted. In recent months, some companies have announced plans to pay back some of their debt ahead of schedule.