No guarantee for Dubai World

A top financial official from Dubai says the heavily indebted investment conglomerate, Dubai World is not guaranteed by the emirate's government.

This has fueled worries over a possible default by the firm, which is involved in projects around the world.

The lack of clarity or direction from the rulers of Dubai since the extent of Dubai World's financial ills became known has been a major source of angst for investors.

On Monday, Dubai's main stock exchange dropped more than 7 percent while the Abu Dhabi exchange fell more than 8 percent, the steepest fall in at least a year.

Driving the financial downturn was Wednesday's announcement that the conglomerate would seek an at least six month reprieve on its 60 billion US dollars in debts.

Trader, said, "Punishment day for us. Why didn't we sell last week?"

Trader, said, "There are offers, but no buyers, even if is down nobody buys at all."

However, the Director-General of Dubai's Finance Department insists the initial reaction of the global markets following the announcement of the restructure was exaggerated.

Abdul Rahman Al Saleh, Director-General of Dubai's Finance Department, said, "The overreaction is not justified, considering the size of the problem, the size of the Dubai World debts, compared to the whole the global markets, and the size of many of the companies as well which were subject to restructure. So I don't see any justification for the initial reaction."

Al-Saleh's comments were the first public remarks by a Dubai official since Thursday, the day after the request for a debt repayment postponement.

Al-Saleh also says lenders to Dubai World bear some responsibility for the current crisis. He explained while Dubai owns Dubai World, it is considered an independent conglomerate.

Adding further confusion to the situation, the Emirate's central bank said on Saturday it stands behind Dubai's local and foreign lenders.