The UAE will draft a strategy for future debt issues by the end of 2010 and plans to increase federal spending in the next three years, the Gulf state's finance ministry said on Wednesday.
The ministry also postponed a decision on Dh20 billion ($5.5 billion) left in a special liquidity facility, saying the oil exporter's banks did not need any state help at the moment.
Younis Al-Khouri, undersecretary and director general at the ministry, said the strategy would guide the federal debt management agency's activities and would be issued simultaneously with a law governing public debt issuance.
"The public debt law, which is expected to be issued this year, is being presented at the moment to their highnesses rulers (of the emirates)," Khouri was quoted as saying on the ministry's website www.mof.gov.ae.
The law would set the legal framework for issuing public debt and a federal committee has been set up to issue bonds and other public debt tools, he said.
The UAE, the world's third-largest oil exporter, has not issued bonds at federal level so far, unlike the individual emirates, especially Abu Dhabi and Dubai. Khouri said in May a sovereign bond was unlikely this year.
Abu Dhabi has been rumoured to be preparing new issues, while Dubai is keeping its options open as it holds a non-deal roadshow in Asia this week.
Khouri said the UAE finance ministry had also started preparing the federal budget for the next three years, adding there would be no deficit despite an expected increase in spending.
"The (spending) rise will be covered through an expected increase in the state's revenues coming from its financial investments and fees gathered by federal ministries," he said.
Khouri did not say how large the expenditure rise would be.
The UAE's balanced budget sets expenditure at Dh43.6 billion for 2010, a 3.4 per cent rise from last year.
The federal budget accounts for around 15 per cent of total UAE government expenditure, most of which is made by the individual emirates, which contribute to the joint budget.
Fiscal policy is a key tool for UAE policymakers as the central bank's flexibility is limited by the country's currency peg to the dollar.
Khouri also said a ministerial committee delayed this month a decision on whether to release the remaining funds from an original Dh70 billion facility set up in 2008, "because banks do not need it currently".
He said the committee meets every month to assess the situation of banks, adding the amount is available for banks with capital adequacy ratios of less than 11 per cent.