Monday, Dec 31, 2012

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By Leila Hatoum

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Dubai's government said Monday it plans to increase public spending in 2013 to support the economy, but still expects to narrow its budget deficit as the debt-laden emirate continues to focus on a prudent fiscal policy.

Dubai will run a budget deficit of 1.5 billion U.A.E. dirhams ($409 million) in 2013, an 18% drop from the fiscal year 2012 forecast, the emirate's media office said in an emailed statement. Public revenues in 2013 are seen at AED32.62 billion, while public expenditure is estimated at AED34.12 billion.

The government has been able to cut the deficit to less than 0.5% of Dubai's gross domestic product, or GDP, the statement added.

The budget reflects the government's preference to expand its expenditures in a bid to support the economy by increasing public spending by 6% in 2013, from the year-before budget, but without sacrificing the objective of reducing the deficit, Abdul Rahman Saleh Al Saleh, the director general of Dubai's Department of Finance, said in the statement.

About 26% of government spending has been allocated to social development in the areas of healthcare, education, housing and community development, while 23% has been earmarked for the security, justice and safety sector.

"Despite the completion of many of the larger projects, Dubai fiscal budget allocates 35% for infrastructure, transportation and the economic sectors, as Dubai continues to grow and its government continues to support new projects," the statement added.

The government also underscored the emirate's commitment in dealing with its obligations by allocating 6% of the total spending to debt.

Dubai and some of its flagship companies had borrowed heavily to finance its ambitious growth plans, but the emirate's economy suffered in the aftermath of the global financial crisis in 2008.

In terms of revenue, government fees-representing 62% of total government revenues, are expected to increase 9.8% compared to 2012, according to the statement.

Write to Leila Hatoum at leila.hatoum@dowjones.com

Copyright (c) 2012 Dow Jones & Co.

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31-12-12 1451GMT