Although the decision to roll over Dubai’s $10bn debt to Abu Dhabi has come as no surprise to most, it will help further improve the growing investor confidence in the emirate. However, the spectre of outstanding debt owed by Dubai’s government-related entities (GREs) still looms large.

Although the debt deal with the UAE central bank has yet to be officially confirmed, it is likely to be renewed on improved terms and potentially extended by up to 10 years.

Confidence in Dubai has already been buoyed in the run-up to the debt deadline set for late February. Dubai won its bid to host the Expo 2020 at the end of last year, an event that is expected to fuel rapid infrastructure development. Local companies are reporting profit growth in 2013 and are securing credit rating upgrades from major ratings agencies. Developer Nakheel announced at the beginning of the year that it would be largely debt-free by 2015.

The cost of insuring Dubai debt via credit default swaps has fallen to historic lows in the run-up to the debt deadline. The extension of the debt has also been seen as a sign of the strengthening relationship between Abu Dhabi and Dubai, which will further improve Dubai’s investor appeal. Often pitted as rivals, the neighbours have been working closely on several projects.

Yet, one obstacle to Dubai’s continued growth is the high level of debt still sitting on the balance sheets of many of its GREs. Despite the successful extension of the debt deadline, little light has been shed on how and when the outstanding GRE debts will be repaid.