Dubai government bond yields tumbled the most in four weeks after the Gulf emirate pledged to halve its 2012 budget deficit as state companies confront $15.5bn in debt maturing this year. The government aims to reduce spending this year by 4.2 percent, narrowing the shortfall to AED1.83bn ($498m), or 0.6 percent of gross domestic product, from a 2011 target of AED3.78bn. Since, the yield on the government's 7.75 percent bond due October 2020 fell 36 basis points, or 0.36 percentage points, to 6.92 percent. “A conservative budget puts the authorities in a good position heading into 2012,” Khatija Haque, a senior economist at Emirates NBD, the UAE's biggest bank by assets, wrote an email to Arabian Business. “The authorities are confident that all the financial obligations will be met next year.” Dubai and its related companies shoulder $129.3bn of debt, amounting to 149 percent of GDP, of which $15.5bn is due in the coming 12 months, according to Bank of America Merrill Lynch estimates. The emirate borrowed the money during a regional economic boom to turn itself into a financial, trade and tourist hub. Home to the world's tallest tower and islands shaped like palm fronds, Dubai was untouched by political unrest that swept through some of the Middle East last year. The emirate is betting a turnaround in tourism and trade will contribute to a 1.8 percent increase in state revenue in 2012, helping reduce the deficit as it trims infrastructure spending by 21 percent. Passenger traffic at the Dubai airport, the world's fourth busiest by international passengers, jumped 7.8 percent in the first 11 months of 2011 to 46.3 million, Dubai Airports said Dec 28. Some 10.5 percent more containers by volume were handled by port operator DP World during the first three quarters of 2011.
