IMF reviews UAE economy, Dubai budget gap up Dubai approved on Thursday its 2010 budget with a deeper deficit than last year as experts from the International Monetary Fund reviewed the shape of the United Arab Emirates economy following a debt crisis. Dubai, a member of the UAE federation, received a last-minute bailout from fellow emirate Abu Dhabi last month to avoid a default on billions of dollars worth of debt of one of its flagship companies. Its ruler, Sheikh Mohammed bin Rashid Al-Maktoum, signed the Gulf emirate s 2010 budget with a deficit of 2 percent of gross domestic product, or 6 billion dirhams ($1.63 billion), up from a 4.2 billion gap envisaged for 2009. The general budget of the government of Dubai represents a balance between necessities of supporting and stimulating the economy on one side and committing to financial rules and sound principles of managing public funds on the other, Dubai finance department chief Abdulrahman al-Saleh was quoted as saying in a government statement sent to Reuters by a banking source. Saleh declined to comment on figures when contacted by Reuters. The approved deficit is in line with a budget committee proposal. The emirate, known for ambitious construction projects, tries to keep its budget gap below 3 percent of GDP. Dubai had forecast its first-ever deficit for its 2009 budget at 1.3 percent of the emirate s 2007 GDP. The final 2009 data were not available. The details of the budget are extremely limited, making it difficult to analyze, especially given the fact that preliminary fiscal outturn figures for 2009 have not been provided, said Monica Malik, chief economist at EFG-Hermes in Dubai. The government s 2010 revenues are projected to reach 29.4 billion dirhams, the statement said. Expenditure stands at 35.4 billion, down from 37.7 billion budgeted for 2009, but Malik said the actual spending could have been substantially weaker last year due to the global crisis. She said expenditure could rise by 7 percent this year, down from a 42 percent jump seen in the 2009 budget, and revenues will increase as the global economy recovers from a downturn. The emirate, facing a debt pile estimated at $80 billion, has ordered government departments to transfer all revenues to the treasury in a move to better control financial flows. Analysts have said tax-free Dubai might consider selling its assets to boost revenues as well as raise fees and charges or introduce more paid-for services similar to its road toll. he IMF said on Thursday it was visiting the UAE to assess the health of the second largest Arab economy and conclude regular 2009 consultations. An IMF staff team is visiting UAE to review with the authorities recent economic developments and conclude the 2009 Article IV consultation discussion, as part of the normal interaction between the IMF and its member states, the fund said in a statement. -Reuters Kuwait cuts Feb crude OSP to Asia by 35 cts/bbl Kuwait has lowered the official selling price (OSP) for its crude oil sales to Asian buyers for February by 35 cents a barrel to $1.20 a barrel below the average of Oman/Dubai quotes, a trader said on Friday. That is within the range of expectations in a Reuters survey. Kuwait set its OSP at $0.85 per barrel below the Oman/Dubai average for January loading. Kuwait s crude price formula is loosely linked to that of Saudi Arabia s Arab Medium grade. -Reuters Jordan s forex reserves up 40 pct in 2009 Jordan s net foreign reserves rose 40 percent to a record $10.87 billion at the end of December compared with the end of 2008 as assets in dinar-denominated savings grew, central bank data showed on Thursday. The kingdom s reserves stood at $7.74 billion at the end of 2008 and had been on an upward trend since a $2 billion debt buyback in March 2007 brought reserves down to $5.2 billion. The current foreign reserve levels were equivalent to almost eight months of imports, a Central Bank source told Reuters, adding preliminary figures show reserves stood at $10.89 billion as of Jan 6, 2010. Reserves stood at $10.533 at end of November 2009, official data showed. Bankers attribute the rise in foreign reserves mainly to the Central Bank of Jordan s (CBJ) policy of allowing a wider interest rate differential against the dollar in favor of the dinar that had encouraged banks and depositors to keep funds in dinars. Even Jordanian expatriates whose earnings were in foreign currencies were switching part of their savings into the dinar, attracted by interest rates as high as 4 percent compared with less than 1 percent on dollars, bankers say. A main plank of monetary policy is the defense of the dinar, which is pegged to the dollar, a policy the International Monetary Fund (IMF) says has served the national economy well. They say maintaining the country s reserves in a comfortable position is crucial to allow the kingdom to pay for its imports and service its foreign debts. The steady build-up in reserves in 2009 has also helped the CBJ to cut interest rates over the last year, inject more liquidity into the economy and prod private banks into cutting lending rates to spur growth. The CBJ has slashed its benchmark lending rate by 200 basis points since November 2008 as the economy shrunk and inflation turned negative in most months of 2009 from record highs. -Reuters
