UAE govt clears $11 bln federal budget draft

DUBAI: The United Arab Emirates government approved a draft 2012 federal budget of 41.8 billion dirhams ($11.4 billion) Tuesday, roughly the same as expected for this year, pencilling in a tiny deficit, the state news agency WAM reported.

Revenue is projected to reach 41.4 billion dirhams next year, WAM reported. That puts the budget shortfall of the world’s No. 4 oil exporter at 400 million dirhams, a mere 0.04 percent of its economic output, according to Reuters calculations.

Health, education and social services will be the key budget priorities, Prime Minister and Dubai ruler Sheikh Mohammad bin Rashid al-Maktoum said during Tuesday’s Cabinet meeting.

Some 1.6 billion dirhams should go on infrastructure projects next year, the WAM said.

The federal budget accounts for roughly 11 percent of total government spending in the UAE, the world’s second-largest Arab economy, with the most occurring at the level of individual emirates, mainly in oil-rich Abu Dhabi.

Oil receipts are not directly included in the federal budget but grants from Abu Dhabi made up almost a third of the total income in 2010, while enterprise profits and various fees accounted for 70 percent, finance ministry data show.

“Once we get the Dubai and Abu Dhabi budget for 2012 we can get a clearer understanding of what the pace of spending is,” said Shady Shaher, senior economist at Standard Chartered.

“We are still relatively bullish on oil for 2012 … we have an average price for Brent at about $117 [per barrel]. Higher oil prices will give Abu Dhabi in particular … space to spend more if needed,” he said.

Abu Dhabi, which sits on 10 percent of global oil reserves and accounts for 90 percent of UAE oil output, spent 245.5 billion dirhams last year, 6 percent less than in 2009.

The emirate, which accounts for some 71 percent of UAE fiscal spending, did not publish its 2011 budget plan. Dubai, which restructured nearly $25 billion in debt in 2010, planned expenditures of 33.7 billion dirhams for 2011.

Fiscal policy is a key tool for UAE policymakers to steer the hydrocarbon-reliant economy. Its dirham currency is pegged to the U.S. dollar.

The 2012 budget still needs to be discussed by the Federal National Council, a government advisory body with no legislative powers, before it is signed by the president.

A version of this article appeared in the print edition of The Daily Star on October 12, 2011, on page 4.




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