Abu Dhabi: The UAE might issue bonds by the end of 2011 or the beginning of 2012, Obaid Humaid Al Tayer, Minister of State for Financial Affairs, told reporters after the Federal National Council (FNC) approved the proposal to cap national debt.

The UAE at present has no public debt, as defined in the law, Al Tayer said.

In the debate over the law, FNC members rejected a proposed article allowing the government to act as a guarantor of banks in the UAE to safeguard the banking system if necessary.

Al Tayer said: "We are not guaranteeing banks, but financial tools or securities. I speak of emergencies which require quick intervention to safeguard the banking system."

During the debate over the UAE budget, FNC members said federal budget cuts should target unnecessary spending and not vital services such as health and education.

Abdullah Nasser Al Mansouri, a member from Abu Dhabi, said no new burden should be allowed to fall on Emiratis.

Members of the council asked why, with the number of students growing steadily, the budget for education is frozen.

Funding for federal universities has been frozen at 2010 levels despite concern over their finances and requests from them to increase their budgets.

The budget will be constant for three years, meaning that measures including the freeze on federal universities is likely to stay until 2013.

UAE University's budget will remain at Dh1.3 billion, and that of Zayed University at Dh321 million. The Higher Colleges of Technology, where financial troubles were the subject of an FNC report this year, had its budget frozen at a little over Dh735 million. Yousuf Al Nuaimi, a representative from Ras Al Khaimah, said the budget ignored the housing of Emiratis, with the budget of the Shaikh Zayed Housing Fund being frozen as well.

Al Tayer said education, health, social affairs and security are top priorities of the government.

Vital services

"Budget cuts will never impact vital services offered to the citizens, including health, education, housing and social assistance," he said.

The budget for 2011 will focus on social development with Dh19 billion or 46 per cent of the total budget allocated to education, health, pensions, social assistance, the Shaikh Zayed Housing Programme and the Marriage Fund.

The federal budget for 2011 is for Dh41 billion, of which Abu Dhabi pays close to Dh12 billion and Dubai Dh1.2 billion. The rest comes from revenues earned by federal bodies rather than other emirates.

The largest source of revenue for 2011 is the Ministry of Finance, with a projected Dh16 billion. The ministries of Interior (Dh3.4 billion) and Labour (Dh3.7 billion) are next.

The main recipients of funding are the Defence and Interior ministries, at a little over Dh6 billion each.

Spending on the ministries of Economy, Foreign Trade, Energy and Public Works is more than Dh1.6 billion.

The Ministry of Education will receive Dh4.6 billion. Health and Social Affairs ministries receive just over Dh2.5 billion each.

Spending on social development will reach Dh15 billion, about 36 per cent of federal spending.