The government of Dubai raised a further $5 billion as part of a $20 billion bond programme launched this year, half of what was expected in the long-awaited issue.

The $5 billion tranche was subscribed to by National Bank of Abu Dhabi and UAE's Al Hilal Bank, the Department of Finance said in a statement on Wednesday.

The first $10 billion tranche was taken up by the UAE central bank earlier this year as Dubai sought to raise funds to support state-linked companies.

By placing the issue with banks, Dubai was demonstrating a measure of independence from Abu Dhabi, the capital and the wealthiest of the seven emirates that comprise the UAE federation, said Mohammed Shakeel, Mideast economist at the Economist Intelligence Unit.

"Going to the private sector shows the Dubai government has not relied on the central bank, and by extension, financial assistance from the Abu Dhabi government," he said.

The department said the proceeds would be managed by a fund established to provide liquidity on a commercial basis to government and government-related entities undertaking projects of strategic importance within Dubai.

Dubai's economy has been hit hard as the global credit crunch ended a six-year boom in the region and sent the emirate's once-flourishing property sector into decline.

The emirate and its state-linked firms have outstanding debt of about $80 billion, much of it incurred during a drive that saw Dubai expand activities in logistics, financial services, property and luxury retail and tourism.

Dubai has said previously that the proceeds from its bond scheme would underpin companies such as Dubai World's Nakheel, developer of Dubai's signature palm-shaped islands, part of its drive to build tourism as an alternative to its income from oil.

Nakheel has $3.5 billion worth of Islamic bonds maturing in December and questions remain over the government's plan for them. Other state-linked firms include Dubai Holding, owned by the ruler of Dubai, Emirates airline and Emaar Properties .

The UAE also includes key oil exporter Abu Dhabi, which earns most of its income from crude oil exports. – Reuters