The United Arab Emirates central bank on Sunday pumped more liquidity into its banking sector amid fears that local stock markets may plunge after debt-laden Dubai asked to suspend debt payments.

The intervention is seen as a step to soothe investors and bank depositors after the shock announcement that state-controlled Dubai World wants to halt payments to creditors until at least May next year.

"This is a step aimed to calm investors. Markets should be calmer (than feared) tomorrow," said Emirati financial analyst Nasser bin Gaith.

"This means that banks will be on the safe side," a UAE official who requested anonymity told AFP.

The central bank's move came just before the stock markets in Dubai and neighboring emirate Abu Dhabi have their first chance on Monday to react to the disclosure of the debt difficulties, which were unveiled just before the start of a four-day holiday for Eid al-Adha.

The central bank said in a statement, unusually issued during a holiday, that it was providing banks with extra liquidity, stressing its support to the banking sector.

British banks reportedly have a total exposure of 30 billion dollars to Dubai World.

And until the UAE stock exchanges reopen on Monday it is uncertain to what extent investors will be reassured by the central bank's statement.

The central bank said the UAE banking sector stands stronger and more liquid than a year ago and that it enjoys a "strong base of stable deposits." 

-AFP/NOW Lebanon