BUDGETING FOR GROWTH

UAE, Dubai 2015 | FINANCE | FOCUS: THE BUDGET

The Dubai Government recently approved its 2015 budget, historically its largest, marking the first budget surplus since the global financial crisis. The Dubai authorities have utilized successful economic growth in 2014 as a spring board to continually develop Dubai as an attractive Emirate to invest in.

In early January 2015, HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, approved the government of Dubai's 2015 $11 billion public expenditure budget. This marked not only the largest budget yet, but the first non-deficit budget since the 2008 financial crisis. The budget has approved an $11 billion spending plan, a 9% increase on last year's figure. Revenues are expected to jump 11% in 2015 compared to 2014, resulting in the first balanced budget since the 2008 global financial crisis. In fact, the no-deficit budget for 2015 will have an operating surplus of $980 million and provide 2,530 jobs. The budget also reflects the growing diversity of Dubai's economy, increasing social agency efficiencies, and stimulating growth via public infrastructure spending.

The government has been able to increase its revenue base through successful budgeting and implementation of government services in 2014 as well as the economic growth of the trade, finance, and real estate markets. Revenues from government services, which represent 74% of total government revenues, is set to increase by 22% compared to 2014. The increase reflects the projected growth rates for the principality, and the evolution and diversity of government services. This increase is due to the remarkable real economic growth by 2014, with limited increments on certain government services and other increments designed to regulate the real estate market. Tax revenues increased by 12% of total government revenues compared to fiscal year 2014, and came to represent 21% of total government revenues. This tax revenue increase can mainly be attributed to customs and taxes on foreign banks, which directly reflects the success of the finance and trade industries in the Emirate. The budget accordingly does not rely on oil revenues, which are set to account for only 4% of total government revenues, a decrease from 5% in 2014, as economic diversification continues. In fact, government revenues rose 11% for the fiscal year 2014, despite lower net oil revenues. All in all, with the increase in the revenue base, the government has allowed for increased revenues to support public spending in 2015.

Through public spending on infrastructure, continually attracting top human talent for its government positions, and emphasis on social programs, Dubai has focused its government expenditures on economic growth and social wellbeing. Distribution of government expenditure figures show that wages and salaries represented 37% of total government spending while providing 2,530 new jobs for citizens. This is a continuation of the settlement and job creation policy the Dubai government has adopted. General administrative expenses, capital expenditures, grants, and subsidies accounted for 44% of total government spending in 2015. The government has said it's keen to keep developing, advancing, and supporting government institutions to provide better government services for citizens and residents. The government said that it will also continue to support infrastructure projects by allocating 13% of government spending to infrastructure. The Dubai government plans to continue to deal with loans seriously by allocating 6% of total spending for debt service. The expenditures on social development in the area of health, education, housing, and community development totals 35% of government expenditure. Dubai's government has also pledged great support to the security, justice, and safety sector by allocating 22% of spending its way. The mainstays of Dubai's public spending, infrastructure, and transport, were allocated 36% of government expenditure, which will contribute to creating an environment attractive to foreign investors.

In sum, the government's budget has utilized economic growth in 2014 to continue to focus on some of the key objectives of HH Sheikh Mohammed. Dubai has continually shifted its revenue generation away from oil revenues and onto the benefits of economic diversification. Public spending on infrastructure projects as well as social programs play a vital role in the 2015 budget and reflect the importance placed on attracting investment and creating a great place to live.