This might entail governments charging to provide guarantees for project finance, or sovereign wealth funds participating directly in vital infrastructure finance programmes.

“For project finance, particularly where the project involves social housing, power generation or the supply of water, the sums involved may be huge and the lead times for such projects may be considerable,” Sheikh Ahmed said. “Therefore, governments in the GCC may need to consider either direct state support in the form of guarantees or in the form of direct funding from sovereign wealth funds.”

Sheikh Ahmed said that to avoid the moral hazard associated with blanket guarantees “governments may need to explore the possibility of providing state guarantees on a commercial basis”

“The key feature here would be the fact that these guarantees would be provided on a fixed term, fixed amount basis for a fee and renewable as appropriate,” he said.

“Also, lead arrangers in project finance deals may have to examine more novel approaches to sourcing lenders. Islamic financial institutions may well play a part here given the asset-based nature of Islamic lending.”

Bankers welcomed Sheikh Ahmed’s proposals. “This is a good idea that could play a role in project finance in 2009 and beyond,” said Darren Davies, regional head of project finance for UK-based HSBC.