The United Arab Emirates will keep to its 2010 federal spending target of 43.6 billion dirhams ($11.9 billion) and will end the year with a balanced budget as planned, a senior finance ministry official said.

The world's third-largest oil exporter raised federal expenditure by 3.4 percent for 2010, but its largest emirates have cut their own spending, scaling back infrastructure projects, lowering subsidies and imposing austerity measures.   

The global credit crunch halted an oil- and real estate-led boom in the UAE, sending the country into its first economic downturn since 1993. Debt problems in property-focused Dubai have hampered recovery in 2010.

"It (the budget) is balanced until now as we planned," Saeed Rashid Al-Yateem, executive director of budget and revenue at the UAE finance ministry told Reuters in an interview.

When asked whether actual federal spending will be 43.6 billion dirhams as budgeted this year, he said: "Yes."    

Fiscal policy is a key tool for UAE policymakers to steer the oil-reliant economy, as the central bank's flexibility is limited by the Opec member's currency peg to the dollar.

The federal budget accounts for around 15 percent of total UAE government expenditure, most of which is undertaken by the individual emirates. It is financed with contributions from the seven emirates and income from fees and investments, but does not include oil receipts.   

Federal spending is equivalent to less than a quarter of expenditure for the Abu Dhabi emirate, which controls 10 percent of the world's oil reserves, but is slightly higher than annual spending in Dubai.

Yateem said the finance ministry had already submitted a proposal for its new 2011-2013 budget to the government, but declined to comment on its parameters, saying only that the focus will be on infrastructure, education and healthcare.   

"I cannot say anything until we get the final decision from the government. We already submitted our proposal," he said after a meeting of senior budget officials in Dubai.

"The main objectives for the three-year budget are to maintain stability in financial resources for the government," he said.   

The UAE finance ministry said in August it planned to increase federal spending in the next three years, adding there would be no deficit despite the expected rise.

Yateem refused to say whether the ministry has already budgeted any debt issuance in the new budget, or if any new revenue sources such as a value-added-tax are being considered.

The country has not issued bonds at federal level so far, unlike the individual emirates. Dubai issued its first sovereign bond in a year in September.

The government is expected to approve a public debt law by the end of this year, which will set rules for debt issuance. - Reuters