Dubai to cut spending until 2013: report

Dubai, bracing for heavy debt redemptions, plans to cut state spending by 20 to 25 per cent until 2013 to narrow its funding gap, a member of the emirate's Supreme Fiscal Committee was quoted as telling a newspaper.

The move, intended to save up to Dh3.5 billion ($953 million), was a "precautionary measure" Ahmad Humaid al-Tayer told Friday's Gulf News.

Earlier this year, Dubai's ruler approved a 2011 government budget with a deficit of around Dh3.77bn.

"To fill the resulting financing gap, expenditure by government bodies in Dubai should be cut by 20 to 25 per cent until 2013," Tayer said.

Dubai has about $30bn of debt maturing over the next two years, with $12bn of that due this year. The largest is a $4bn loan to Investment Corporation of Dubai that falls due in November.

The 2011 gap is equivalent to 1.1 per cent of gross domestic product in 2008, the latest year for which full economic output data is available.

"The shortfall in the 2011 budget is not a major concern as yet, and definitely we'll be looking for alternatives (in revenue streams) throughout the year," Tayer told Gulf News.

Analysts expect that Dubai, part of the United Arab Emirates seven-emirate federation, to cover the shortfall by issuing bonds despite a challenging debt outlook.

A burst property bubble forced Dubai to get to grips with its debt pile, estimated at $11bn or 123 per cent of GDP, and introduce austerity measures over the past year.

The emirate was bailed out by wealthy neighbour Abu Dhabi in 2009 with a $10bn lifeline helping its Dubai World property unit Nakheel narrowly avoid default on Islamic bonds.

Tayer said the move to cut spending over the next few years did not mean that government entities would increase fees or service charges to boost revenues.

The UAE is one of the few countries in the Arab region not hit by regional unrest, after several countries, including nearby Oman and Bahrain, saw waves of protests inspired by uprisings that toppled Egypt and Tunisia's leaders.

Both business hub Dubai and oil wealthy Abu Dhabi, the federal capital, are seen as unlikely sites of unrest. But the federation has pledged some $1.6bn to improve infrastructure in its poorer northern emirates, and has also subsidised goods such as bread and rice.