Dubai still has substantial debt on its books from the excesses of earlier boom years that predates its evolution into a hub for trade, logistics and financial services. With the country's economy reeling in the aftermath of the financial crisis, government-owned Dubai World shook global financial markets when it called for a standstill on outstanding debt in 2009.
At the time, neighbouring Abu Dhabi—with major financial muscle from its oil wealth —tossed the country a financial lifeline that gave it some breathing room. Since then, Dubai's economy has recovered strongly, culminating in its scoring a big win to host the 2020 World Expo.
(Read more: Dubai celebrates winning right to host Expo-2020)
"This should prove supportive for sentiment and reaffirms strong ties to Abu Dhabi at the sovereign level," Jean-Michel Saliba, Middle East – North Africa economist at Bank of America-Merrill Lynch Global Research, wrote in a note to clients on Monday.
Although an agreement of some kind had been largely anticipated by financial market watchers, analysts have speculated about the exact terms of a deal offered by Abu Dhabi.
"Although the extension is for five years, versus the rumored 10 years previously, the official announcement and its mentioning of the Dubai Expo 2020 makes it amply clear in our view that a further extension is in in the cards, given that the newly extended facilities will essentially mature close to the [event] itself," Saliba added.
Simon Williams, Middle East Chief Economist at HSBC, shared a similar view, describing the terms as "generous", and pointed to the "strength of on-going support from the wealthy federation for Dubai".
"According to IMF data, the refinancing leaves the Government of Dubai facing repayments of some six billion over the coming four years, the equivalent of just five percent of [estimated] 2014 GDP," he explained to CNBC.