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Sat 7 May 2011 01:11 PM

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UAE mulls call to raise federal budget spending

Senior finance ministry official confirms requests from ministries, gov't entities for more money

UAE mulls call to raise federal budget spending
The UAEs finance ministry will assess demands to raise federal budget spending in coming weeks.

The UAE's finance ministry will assess demands to raise federal budget spending in coming weeks and it is not planning to issue a sovereign bond at the moment, an official said on Saturday.

The world's third-largest oil exporter had originally set its 2011 budget with a shortfall of some AED3 billion ($817 million). So far, the Gulf Arab state has not issued bonds at the federal level, unlike the individual emirates.

"We have been receiving some of the ministries' and government entities' requirements and we are studying supporting them in the extra budget requirement," Younis al-Khouri, undersecretary and director general at the UAE finance ministry, told Reuters.

He did not say how high the additional demands were, adding the ministry officials were going to meet at the end of May or in early June to assess them.

Asked whether the ministry was planning to issue a federal sovereign bond, Khouri said on the sidelines of a Gulf finance ministers' meeting: "Not now."

In November, the UAE cabinet approved the 2011 draft budget forecasting expenditure of AED41 billion, less than the 2010 plan.

Worried by regional unrest, the OPEC member has said it will spend $1.6 billion to improve infrastructure in less developed northern emirates, raised military pensions by 70 percent and introduced bread and rice subsidies. Sources have said plans to hike fuel prices were also delayed.

The UAE, which has avoided the turmoil challenging autocratic regimes in nearby Bahrain and Oman, did not say how it was planning to finance these new measures. The UAE's relatively small native population enjoys one of the world's largest incomes per capita at nearly $49,000.

In January, the UAE minister for financial affairs said he expected the country, rated Aa2 by Moody's, to issue its first sovereign bonds toward the end of the year or in early 2012 after its top advisory council passed a new public debt law.

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 country's currency peg to the dollar.

The federal budget accounts for around 15 percent of total UAE government expenditure, most of which is undertaken by the individual emirates.

It is financed with contributions from the seven emirates and income from fees and investments, but does not include oil receipts.

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