Deficit Fears in the United Arab Emirates

The United Arab Emirates urged all of its federal ministries on July 8 to make an effort to cut spending for 1998 to avert a deficit, saying projected revenues would be around the same next year as they were in 1997.

The finance and industry ministry told the 24 government departments to submit their draft budgets before September 18 and asked them to keep up efforts to boost their incomes as part of a diversification drive.

"We hope there will be a balance between expenditure and revenues in next year's budget," it said in a letter published in local newspapers.

"You are urged to control spending and avoid unnecessary expenditure. But the balance in the budget would not be possible without further efforts to upgrade productivity and increase non-oil revenues."

The ministry said it would not accept new projects for the next calendar year unless at least 80% of the existing projects are completed.

Like other Gulf oil producers, the United Arab Emirates has sought to tackle a budget shortfall through trimming spending and boosting non-oil earnings, mainly returns from overseas investment and fees on government services.

Oil provides more than two-thirds of the UAE's income, and this has made its economy and budget highly vulnerable to crude price changes.

Abu Dhabi and Dubai, the main oil producers in the United Arab Emirates, finance the bulk of the federal budget, which has seen large surpluses in some years due to spending cuts and additional contributions by those members.

Federal spending in 1997 was projected at 5.41 billion US dollars and revenues at 5.14 billion US dollars, leaving a deficit of around 270 million US dollars.

The United Arab Emirates produces around 2.16 million barrels per day of crude under an Opec-decreed quota, earning it more than 10 billion US dollars a year.

"Despite diversification attempts, oil will continue to be the main source of income for the United Arab Emirates' federal budget," the finance and industry ministry said.

"Oil earnings next year are expected to be equivalent to those in 1997, and any increase would be used in paying outstanding dues to creditors.