* Money will be disbursed over 10 years
* Bahrain is facing budget deficit in 2013
* It needs oil at $122/barrel to balance budget
DUBAI, Feb 18 The United Arab Emirates will
grant Bahrain $2.5 billion for development projects in the Gulf
Arab state, part of a regional funding programme implemented
after a pro-democracy uprising in 2011, Bahrain's state news
The money from the UAE, to be disbursed on an annual basis
over the next 10 years, would finance projects in housing,
electricity, water, infrastructure and social services, the
Bahrain News Agency (BNA) said.
Wealthier Gulf Arab neighbours pledged in March 2011 to each
extend $10 billion over 10 years to Bahrain and to Oman to ease
tensions and support economic development in the two small
non-OPEC oil exporters. The pledge came after a pro-democracy
uprising in Bahrain and protests in Oman where citizens demanded
jobs and a cleaner government.
Bahrain, which depends on crude from an oilfield it shares
with Saudi Arabia for some 70 percent of its budget revenue,
said last June that it had not yet received any of the pledged
money, and it was unclear when the funds would start to flow.
In December, it signed an agreement with the Saudi Fund for
Development for a $448 million grant to finance various projects
in the country. It was not clear whether the Saudi grant was
part of the pledged aid package.
The kingdom, base for the U.S. Navy's Fifth Fleet, has been
in political turmoil since the protests erupted in 2011, led by
majority Shi'ites demanding an end to the monarchy's political
domination and full powers for parliament.
Thirty-five people died during the unrest and two months of
martial law that followed, the government said, although the
opposition puts that number at more than 80.
Bahrain needs oil prices to average $122 per barrel this
year to be able to balance its budget, a finance ministry
official estimated in November, by far the highest level in the
Gulf Arab region.
It is also the only nation out of the six-member Gulf
Cooperation Council (GCC) facing a fiscal deficit in 2013. A
Reuters poll in January forecast its budget gap would widen to
4.5 percent of economic output in 2013 from an estimated 2.7
percent last year.
Brent crude averaged $112 per barrel in 2012 and is
expected to float around $110 this year, a separate Reuters
survey showed last month.
Bahrain's government now plans to cut its budget spending by
almost 6 percent to 3.45 billion dinars ($9.2 billion) in 2013,
seeking to curb its deficit, a draft budget showed in November.
It boosted its original 2012 expenditure plan by nearly 19
percent in September 2011 in order to soothe the social turmoil
that hurt its $27 billion oil and finance-driven economy.
Analysts have said Saudi Arabia, which supports Bahrain's
Sunni rulers politically, could give the state more oil from the
shared Abu Safa field if Manama's budget runs into trouble.
In a bond prospectus last June, however, Bahrain said no
assurance could be given that the current level of output that
it receives from Abu Safa would be maintained.
The field's current production level is just below 300,000
barrels per day, of which Bahrain currently receives 50 percent.
Its 2013-2014 budget counts on its output from that field
staying at 150,000 bpd in both years.
($1 = 0.3770 Bahraini dinars)
(Reporting by William Maclean, Amena Bakr and Martin Dokoupil;
Editing by Susan Fenton)