Sunday, January 11, 2009

Dubai sees $1.1 bln '09 budget deficit, first ever

Dubai expects to post its first budget deficit in 2009 as major infrastructure projects weigh on its budget, but the Gulf trade hub plans to raise spending 11 percent, a senior policy-maker said on Saturday.The government fiscal deficit was expected to reach 4.2 billion dirhams ($1.14 billion) in a 2009 budget based on an oil price of $45 a barrel, said Nasser al-Shaikh, director-general of Dubai's finance department.Total government spending in 2009 was expected to reach 135 billion dirhams, Shaikh said, with 37.7 billion dirhams of that to be spent on the public sector alone."As far as I know we have never had a deficit in Dubai before," Shaikh said."Operationally we are at a surplus of 3 billion dirhams but if you add investment in infrastructure, the deficit is 4.2 billion dirhams," he said, referring to major projects such as the emirate's metro network and new airport.These projects would not however be delayed or cancelled, he said. "His Highness (the ruler of Dubai Sheikh Mohammed bin Rashid al-Maktoum) has made it very clear that we will continue with our projects," he said.Total revenues in 2009 were estimated at 138 billion dirhams, a 4 percent increase from 2008.The deficit represents 1.3 percent of Dubai's gross domestic product at the end of 2007, Shaikh said, predicting a balanced budget within two to three years. "We have a number of options. One is the capital markets if they open up," he said, adding that Dubai could also rely on its reserves if needed.Dubai has suspended a tranche of a 15 billion dirham ($4.08 billion) notes programme intended to fund development projects "due to market conditions," he said. [nLA478187]DUBAI GROWTH REVISED DOWNShaikh reiterated remarks made at the end of last year that Dubai's economic growth was expected to be between 4 and 6 percent in 2009, compared to an earlier forecast of 11 percent."In the current global environment this (11 percent) is not achievable," he said. "We are in the process of revising our strategy."Dubai had appointed consultants as part of its decision to seek a sovereign credit rating by mid-2009, without naming them.A committee set up by the government to tackle the impact of the global credit crunch, to which Shaikh belongs, has focused mainly on the emirate's once-booming property sector, he said."On real estate we have a somewhat clear picture of what is coming," he said, reiterating that the number of new residential units in 2009 would -- "best case scenario" -- reach 32,000. "Gradually we need more liquidity injected into the banking system but I don't think anyone can give you the ultimate figure of how much is needed," he said.The United Arab Emirates' central bank set up a 50 billion dirham emergency bank lending facility in September and the government has injected part of a 70 billion dirham rescue facility into bank deposits.Dubai's sovereign debt stands at $10 billion while debts of state-affiliated firms amount to $70 billion, Mohamed Alabbar, a member of Dubai's ruling council and chairman of Emaar Properties EMAR.DU said in November.

No comments: