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UAE Cabinet approves biggest-ever budget of Dh180B
High oil prices boosting revenues, allowing the government to increase spending for well-being of citizens, residents
Sheikh Mohammed; Lt-Gen Sheikh Saif bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Interior; and Mohammad Abdullah Al Gergawi, Minister of Cabinet Affairs and the Future, at the Cabinet meeting in Abu Dhabi on Sunday.
The UAE Cabinet on Sunday approved a higher budget for 2019 as high oil prices are boosting revenues, allowing the government to increase spending on the well-being of citizens.
The Cabinet approved a zero-deficit budget of Dh180 billion for the next three years and Dh60.3 billion for 2019 compared to Dh51.4 billion in the previous year, an increase of 17.3 per cent.
"I have chaired today a Cabinet meeting, during which we approved the federal budget of Dh180 billion for the next three years," His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, tweeted.
"Fifty-nine per cent of the budget will go to education and social development," he added.
"Citizens are top priority, and we have allocated the largest part of the budget to ensure their prosperity, health, education and security," Sheikh Mohammed said.
The UAE has allocated 42.3 per cent of the budget for community development, 17 per cent for education and 7.3 per cent for healthcare.
During the Cabinet meeting, a new federal law was adopted to regulate the space and advanced technology sectors in the UAE.
"The goal is to open up the space sector to investment, research and partnership building. It was a coincidence to adopt a large federal budget with the new law for space sector. Both will take the Emirates to new heights," Sheikh Mohammed tweeted.
"The budget announced [on Sunday] indicates expenditure of Dh60 billion per annum over the next three years. This represents circa 17 per cent increase over the 2018 budget of Dh51.4 billion. Higher oil revenues have enabled the government to increase spending which is very timely right now as some sort of increase in government spending is required to boost economic activity in the country," said Anita Yadav, head of Fixed Income Research at Emirates NBD.
"We are neither surprised to see the increase nor to see the sectors where bulk of the budget will be spent. The federal level budget generally focuses on country level funding of education, some roads and community development and this is what is being planned now as well," she said.
Oil prices have been on the rise over the last few months, crossing $80 per barrel, resulting in increased revenues for the UAE government. Brent last traded at $82.73 per barrel on Friday. The average Brent and WTI crude oil price started the year at $69.08 and $63.7 per barrel in January, respectively.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said the 2019 federal budget suggests an acceleration in projected spending to 17.3 per cent for 2019 from the 2018 budget, pointing to significantly more expansionary fiscal stance.
"This indicates a shift to a markedly more supportive fiscal position, in line with recent packages to support growth at country-wide and emirate level. We also envisage an acceleration in consolidated government spending in 2019, which is central to our assumption of stronger real-non-oil GDP growth," Malik said in a statement to Khaleej Times.
Atik Munshi, senior partner at Crowe UAE, said the UAE's zero-deficit budget for the next three years indicates that the government is confident and resources are sufficient.
"The focus on social welfare particularly on education and healthcare will reap long term benefits. The rise in international oil prices will help the UAE as the Emirates is one of the few countries that has adopted technology very rapidly and the government budget, I hope, will also take into account the additional investment in the technology which will catapult UAE to the next level," Munshi said.
He hoped that the budget will also boost market sentiment.
Suresh Kumar, president of the Indian Business and Professional Council of Dubai, said the federal government is setting the pace for economic growth in the years ahead by declaring that the three years budget will be "balanced", underscores stability and consistency in approach.
Kumar stated that higher allocation for socio-economic sectors such as education, healthcare and community development augur well for its citizens and such growth plans and capital expenditure create sustainable assets.
"All in all, economy will get a fillip for positive momentum," Kumar said.
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