The central bank of the United Arab Emirates (UAE) has said it will provide banks with extra liquidity.

The news comes days after the state-owned Dubai World said it would ask for an extension on repaying its debts, sending world stock markets tumbling.

The move appeared designed to head off a possible run on UAE banks when they open after a four-day break for the Muslim Eid al-Adha holiday. Dubai’s government is expected to make a statement before the market opens.

The International Monetary Fund has welcomed the decision by the UAE central bank. “The United Arab Emirates is a strong resource-based economy and we welcome today’s announcement,” an IMF statement said.

There are fears that the stock market could plunge by up to 10%. But Asian markets saw clear gains early on Monday, with Japan’s Nikkei rising 2.39% in morning trading, and Hong Kong’s Hang Seng boosted by more than 3% within minutes of opening.

Meanwhile, neighbouring Abu Dhabi has said it will “pick and choose” how to assist Dubai. “We will look at Dubai’s commitments and approach them on a case-by-case basis,” an Abu Dhabi government official said on Saturday.