What will be the impact of the Dubai debt standstill on the rest of the GCC countries?
Senhadji: There are two main channels—trade and financial. The trade channel is relatively limited, given that Dubai represents only 10 percent of the GCC’s GDP. Intra-GCC trade is also very small, about 10 percent of total GCC trade. The impact through financial linkages has been a bit stronger. These channels involve bank balance sheet exposure to Dubai entities, especially in the property and construction markets. Assuming that the credit problem in Dubai remains contained and that some resolution is rapidly round, the regional impact should be limited. There is some impact on neighboring countries as well as on India and Pakistan, because Dubai employs a large number of workers from these countries. As for the advanced economies, some isolated banks were hit, but none had exposures that were systemic in nature. IMF Survey online: What policy measures is the IMF recommending to correct financial sector weaknesses? Khamis: The priority is to ensure that the process of cleaning up ban
