DUBAI, United Arab Emirates (CNN) - The United Arab Emirates pledged $10 billion to prop up Dubai, one of its most ambitious members, Dubai's government said.
Dubai launched a $20 billion long-term bond program Sunday in an effort to cover loans that financed its aggressive development strategy.
The Central Bank of the UAE bought up the first tranche of the bond issue, $10 billion, Dubai said. The five-year bonds pay 4 percent per year.
"This is a clear step from the central government to back up Dubai," said Khald Masri, a partner in Rasmala Investment, a very active investment bank in the region. "The central government's step will help ease the tense situation in the local economy and markets."
Dubai admitted that it needed the Central Bank money to stay afloat as credit has dried up, though it couched the statement in financial jargon.
"This issuance will provide the Dubai Government with the necessary liquidity to substitute the liquidity that has dried up globally in the last 12 months and accordingly meet all upcoming financial obligations," it said. "This program will secure the necessary funding for Dubai to meet its financial obligations and continue its development program."
The bond is an unsecured fixed rate paper, Dubai said.
"The fixed rate at 4 percent per year is excellent," investment banker Masri said. "Dubai got the best deal in that, taking into account the conditions in the international markets."
But he warned there was "no way" Dubai could get as good a deal from international markets as it did from the UAE when it issues the second $10 billion in bonds.