UAE govt clears $11B federal budget draft for 2012

UAE govt clears $11B federal budget draft for 2012

Spending projected at 41.8 bln dirhams, in line with 2011 plan; Revenue seen at 41.4 bln dirhams; Govt approves additional 2011 spending of 698 mln dirhams

October 11, 2011 4:52 by Reuters

The UAE government approved a draft 2012 federal budget of 41.8 billion dirhams ($11.4 billion) on 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 said. 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 Mohammed 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.

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.

The cabinet also approved additional federal expenditures worth 698 million dirhams for 2011, including 144 million for the health ministry, the WAM said.

The UAE, which has avoided social unrest rocking nearby Bahrain, Oman and Yemen this year, set its budget spending at 41 billion dirhams and revenue at 38 billion for 2011.

Analysts polled by Reuters in September forecast the UAE to book a consolidated fiscal surplus of 7.8 percent of GDP in 2011 thanks to robust crude prices of over $100 per barrel . The country does not publish consolidated fiscal data.

The Gulf Arab federation of seven emirates spent 39.6 billion dirhams from its federal budget in 2010, the least in three years, ending the year with a 207 million dirham surplus, or 0.02 percent of gross domestic product. ($1 = 3.673 UAE Dirhams) (Reporting by Martin Dokoupil and Mahmoud Habboush; editing by Anna Willard)