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Federal Budget of UAE 2010

Mehmood-Ul-Hassan Khan

HH. Sheikh Khalifa bin Zayed al-Nahyan

His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai and the cabinet of United Arab Emirates announced a Dh43.6 billion federal budget for 2010. The budget represents an increase of 3.4 percent compared to 2009. Furthermore there will be no deficit spending for the sixth consecutive year in the federal budget 2010. It reflects that the federal government is keen on utilising its fiscal policy to make sure that the country pulls out of the bad effects of the global economic and financial crisis in the days to come. The seven emirates, including Abu Dhabi and Dubai also have their local budgets, and economists believe that their cumulative spending may provide additional stimulus to the macro-economy.

UAE Prime Minister

UAE Prime Minister

The budget highly speaks of the resilience of the UAE economy and the vision of the country’s leadership. It showed that the country’s leadership was determined to take the UAE forward by ensuring comprehensive development with emphasis on the socio-economic sector. It is hoped that the budget promotes confidence among the business community. The 22.5 percent allocation on education sector gives a clear-cut indication of the leadership’s emphasis on developing the country’s youth. A 41 percent spending on social development is a laudable commitment of the leaders of UAE for its common people.

One of the main characteristics of the budget is that it would be balanced and funded by income from fees, levies and investments, and contributions of Dh17.7 billion from the emirate of Abu Dhabi and Dh1.2 billion from Dubai. The UAE federal budget does not include revenue from the export of oil.

Zero-budget mechanism

With the introduction of the new system (zero-budget), the UAE’s federal budget would cover a three-year period instead of the present one year. The budget is first zero-based three-year budget that will cover the period from 2011 to 2013. The UAE is probably the first country in the region to introduce the zero-budget regime, which is practice in about 28 states in the United States UK, Singapore and several other countries around the globe.

Strategic priorities

Sector Budget %
Social sector, education and health 41
Infrastructure development 17.5
government services 39

Every country has its own strategic priorities and the UAE is not any exception. The federal budget of 2010 reflected the UAE’s strategic priorities and focused on social development, education and health. It allocated a total of Dh9.8 billion towards many projects of schools and higher education which representing 22.5 percent of the total budget. A further Dh7.6 billion or 17.5 percent of the total allocation has been set for infrastructure development projects throughout the country.

Statistical analysis

The total allocation of the budget 2010 suggests that it will be the largest in the UAE’s national history despite the ongoing global server economic recession and financial crunch. The budget also reflects a strong fiscal strategy that has helped the UAE to develop a diversified income portfolio, which in 2010 will include a total of Dh25.8 billion in revenues at the ministry and federal authority level, compared to revenues of Dh7 billion achieved in 1999. The IMF expected exports to reach US$165.5bn (Dh608bn) in 2009, US$188.2bn in 2010, US$207.2bn in 2011 and US$221.9bn in 2012. The broad money supply is expected to rise in 2009 to Dh731.6bn, from Dh674.3bn in 2008. It will continue to rise to reach Dh825bn in 2010.

Social sector development

According to the budget 2010 the social sector will be a key focus for spending, education, health, labour, social, Islamic, sports, youth and cultural affairs as well as housing programme receiving a combined Dh17.8 billion or 41 percent of the total budget. Defence, security, justice, foreign affairs and other federal authorities will receive Dh17.2 billion, or 39 percent of the budget.

Increase in education spending

Dh7.2 billion, a 16.5 percent share of the budget has been allocated to the ministry of education to continue its development plans within government schools. These include a number of initiatives such as the ‘schools of tomorrow’ and ‘teacher of the century’ programmes, as well as various educational infrastructure projects in ICT, health and safety, curriculum reform, facilities development and several projects to serve students with special needs.

Furthermore, Dh2.7 billion, a 6.2 percent share, will be spent in areas of higher education, research and development, supporting the different plans, programmes. These include overseas scholarships for UAE citizens, Emiratisation of the educational sector as well as the development of facilities within the UAE’s many universities.

The budget share allocated to the ministry of health will be set at Dh2.8 billion, an increase of about Dh140 million over last year’s budget and one which aims to ensure service excellence. The ministry’s main priorities will focus on providing high quality health services to citizens as well as the development of new medical facilities, Emiratisation of the medical, technical and administrative cadres within the health sector and the implementation of an advanced health information system (HIS) connecting the nation’s health facilities.

Infrastructure development

The leaders of UAE have firm belief in a balanced development philosophy. The budget has set a total of Dh7.6 billion towards federal infrastructure development projects and programs such as roads and transport, medical facilities, housing and government facilities.

A further amount of Dh275 million has been set aside for the completion of various initiatives within the ministry of interior, ministry of justice, ministry of youth and cultural affairs and the ministry of social affairs, including: police, civil defence and immigration buildings Ajman and Fujairah courts and public prosecutors buildings Falaj al-Mu’alla courts building Umm Al Quwain and Ajman cultural centres Ras Al Khaimah, Dibba and Fujairah ladies’ centres.

No new levy

The federal budget for 2010 announced without introducing any new fee, levy, or a long-planned value-added tax. The public spending allocation under the budget was up 3.4 percent from 2009, when the UAE raised expenditure by 21 percent to Dh42.2 billion to help struggling economic growth.

Business community reaction

Business community and economic experts welcomed the increased allocation in the new UAE federal budget as a confidence building measure that would help speed up the country’s rebound. According to them it gives a positive signal which is forward-looking too. Majority of the them are agreed that the increased spending on infrastructure development and stress on the education sector will help significantly improve the confidence of the local and international business communities about the rapid recovery of the UAE’s economy and its resilience against the ongoing severe global economic recession.

Tristan Cooper, chief analyst for Middle East Sovereigns at Moody’s Investor Service, said that a small increase in the budget size would instrument the speedy recovery of the private sector. Senior economist at EFG-Hermes Investment bank in Dubai said that the overall spending of the individual emirates would remain strong at 18 percent.

Concluding Remarks

It is a balanced and forward-looking budget which shows the business, investment and people friendly policies of the leaders of the UAE. To achieve its strategic socio-economic goals more focus is given to education, health, infrastructure and export-oriented policies.

3 thoughts on “Federal Budget of UAE 2010”

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