Dubai's ruler on Sunday approved a 2012 government budget with a smaller deficit than in 2011, an official statement said, as spending on development projects in the debt-laden Gulf Arab emirate decreased. The budget shortfall of the United Arab Emirates member was set at 1.83 billion dirhams ($498.2 million) or 0.6 per cent of its 2010 gross domestic product, down from a 3.78 billion gap or 1.3 per cent of GDP planned for 2011. Spending is projected at 32.26 billion dirhams, the statement said, slightly down from 33.68 billion planned for 2011. Revenues have been set at 30.43 billion dirhams, up from 29.91 billion projected for 2011. The statement did not say whether Dubai planned to issue government bonds tofinancethe gap. The emirate's government launched a $500 million 10-year bond in June. Dubai carrier Emirates raised $1 billion in a five-year issue the same month, yielding 5.125 per cent, which attracted orders of over $5 billion. The Gulf trade and business hub, whose budget stands at around 14 per cent of that of neighbouring Abu Dhabi, does not release regular updates on its fiscal performance. Dubai relies on various fees, taxes and customs duties for around 85 per cent of its budget revenues since it lacks oil wealth of Abu Dhabi. Fiscal policy is a key tool for UAE policymakers to steer the oil-reliant economy, as the central bank's flexibility is limited by the OPEC member's currency peg to the U.S. dollar. Most of UAE government expenditure is undertaken by the individual emirates with Dubai accounting for around 11 per cent of the total. Dubai, which narrowly averted a bond default in 2009, could use money raised by its sovereign wealth fund to help repay $3.8 billion in bonds owed by state-linked firms which mature next year, a source said. The Gulf Arab emirate has clawed its way back from the depths of its debt crisis, helped by an economic revival in trade and tourism and its safe-haven status amid the regional social revolts, but still faces the challenge of big debt repayments.
