Reuters reported that Dubai's ruler has approved a 2012 government budget with a smaller deficit than in 2011 as spending on development projects in the debt laden Gulf Arab emirate decreased.

The budget shortfall of the UAE member was set at AED 1.83 billion or 0.6% of its 2010 gross domestic product, down from AED 3.78 billion gap or 1.3% of GDP planned for 2011.

Spending is projected at AED 32.26 billion, slightly down from AED 33.68 billion planned for 2011. Revenues have been set at AED 30.43 billion, up from AED 29.91 billion projected for 2011.

The statement did not say whether Dubai planned to issue government bonds to finance the gap. The emirate’s government launched a USD 500 million 10 year bond in June 2011.

Dubai carrier Emirates raised USD 1 billion in a five year issue the same month, yielding 5.125%, which attracted orders of over USD 5 billion. Dubai, whose budget stands at around 14% of that of neighboring Abu Dhabi, does not release regular updates on its fiscal performance.

Dubai relies on various fees, taxes and customs duties for around 85% of its budget revenues since it lacks oil wealth of Abu Dhabi. Fiscal policy is a key tool for UAE policymakers to steer the economy, as the central bank’s flexibility is limited by the OPEC member’s currency peg to the US dollar.

A source said that Dubai, which narrowly averted a bond default in 2009, could use money raised by its sovereign wealth fund to help repay USD 3.8 billion in bonds owed by state-linked firms which mature next year.

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.

(Sourced from www.gulf-times.com)