Dubai and its government-controlled companies will boost spending by 11 percent this year from 2008, officials here said Saturday, as it seeks to stimulate the economy amid global financial crisis. The finance department estimates the new spending will result in Dubai's first-ever fiscal deficit. Other Gulf governments, including Saudi Arabia and Oman, have announced recently that they too will risk deficits next year instead of cutting back on spending. For Dubai, the move may also boost public confidence in the emirate's opaque finances. Analysts have raised questions about the large debt load Dubai has taken on in recent years to finance its explosive growth. Dubai is one of seven, semi-autonomous emirates that make up the United Arab Emirates. It doesn't have its own sovereign debt rating, but credit-rating agencies have recently revised downward the outlook - and in some cases, the actual credit rating - for a handful of Dubai-controlled corporations. The city-state doesn't pump much oil itself, so has depended on attracting foreign investment, especially from its oil-rich neighbors, and borrowing to finance growth. The global financial crisis and sharply falling oil prices have hit confidence hard here. The emirate's once, red-hot property and stock markets are faltering, tight global credit appears to be strangling some big projects, and companies are laying people off. Dubai's total consolidated, budgeted spending will rise to AED135 billion ($36.75 billion), including government spending of AED37.7 billion, the government said. Dubai's finance department expects the deficit to touch AED4.2 billion, or 1.3 percent of Dubai's estimated gross domestic product of AED301 billion. “We are confident that this budget plan will help consolidate our markets and keep our economy healthy while creating a thriving environment to grow inward investment, ensuring long-term success for the emirate,” said Nasser Al-Sheikh, director general of the department of finance, said Saturday. He also said that Dubai has suspended a tranche of a AED15 billion (S$6.05 billion) notes program intended to fund development projects due to the credit crisis, a senior policy-maker said on Saturday. While the first AED6.5 billion tranche of the medium-term-note (MTN) program has been issued, a second “We chose to suspend the second tranche because of market conditions,” Al-Sheikh said, adding that the program would resume once the situation improves.
