DUBAI: A government fund set up to help debt-ridden state-linked firms will need to be “topped-up” by as much as $2.4 billion over the next two years, JP Morgan said in a note, with several looming repayment deadlines at Dubai Inc.

The US investment bank said that Dubai is likely to tap capital markets to shore up cash for the Dubai Financial Support Fund (DFSF) adding asset sales cannot be ruled out.

“A key challenge is that a substantial portion of the support required would be front end loaded (2011-12),” the note, dated Feb 25, said.

“We estimate that DFSF’s cash will get exhausted later this year or early next, and will have to be topped up by $1.3 – $2.4 billion over the next two years.”

The Gulf city state managed to amass a significant debt burden — over $100 billion by some estimates — as it overstretched itself to pay for ambitious projects such as islands in the shape of palm trees.

Among assets that Dubai could sell, JP Morgan cited non-core investments under the emirate’s sovereign wealth fund, the Investment Corporation of Dubai (ICD), such as stakes in Union National Bank , Dubai Aluminium, and Borse Dubai.

State-linked companies, collectively referred to as Dubai Inc, came under the spotlight in late 2009 when one of the emirate’s largest holding companies, Dubai World [DBWLD.UL] began to restructure about $25 billion in maturities.

The move shocked global markets and dented investor confidence in Dubai’s economic model which relied heavily on developments in the real estate sector.

JP Morgan said debt at Dubai’s “healthy entities”, which it sees at $45 billion, will be managed without external support but said about $8.5 billion will be a challenge. It estimated total debt of $79 billion for Dubai-related entities.

Dubai tested international appetite from bond investors, and issued an oversubscribed $1.25 billion government bond in September.