Dubai Plans to Slash Future Budget Spending

2 September 2010

Dubai plans to slash its budget spending in the coming years as new infrastructure projects will only be launched if they benefit the emirate and the United Arab Emirates' economy, its finance department said.

Dubai's government is expected to run a lower budget deficit than thought this year but it needs to improve its fiscal health further facing a looming debt pile in state-owned enterprises.

'Since most of our major infrastructure projects have been completed or about to be completed over the next 2-3 years, we envisage a significant fall in development expenditure going forward,' a spokeswoman at the Department of Finance said.

'New projects, if any, would only be based on the impact of these projects on Dubai and the UAE economy,' she said.

Development expenditure averaged around 31 percent of Dubai's budget in the last two years after jumping five-fold between 2005 and 2008.

In February, Department of Finance said it planned to trim the government's operating expenses by 15 percent this year to reduce the budget gap.

When asked whether the government planned to cut spending even further, the spokeswoman said: 'Further work on this is being done by the task force for the future and impact of this would be seen in the medium term plan.'

She did not give details on additional spending cuts and did not comment on whether officials also planned to boost the revenue side of the upcoming 2011-2014 budget, saying parameters of the next year's budget will be announced in January.

Dubai's 2010 budget was set with expenditures of 35.4 billion dirhams ($9.64 billion) and a deficit of 6 billion or 2 percent of the gross domestic product.

The emirate relies on various fees and taxes for around 77 percent of its budget revenues since it lacks oil wealth of neighbouring Abu Dhabi.

A head of Dubai's budget committee said last month the 2010 budget shortfall could be smaller than projected, indicating there were no immediate plans to raise revenues.

Dubai, whose budget stands at just 17 percent of that of Abu Dhabi, does not release regular updates on its fiscal performance.

A document obtained by Reuters showed last week that the debt of state-owned Dubai World stood at $39.9 billion, almost double the previous estimates, which analysts said could put Dubai's finances under more pressure. – Reuters

Source: Trade Arabia