Surplus budget is Dubai’s New Year gift

Muzaffar Rizvi/Business News Editor / 4 January 2015


Dubai — Dubai on Saturday wowed its residents and silenced its critics with an operating surplus of Dh3.6 billion, the first ever since the global financial crisis in 2008, in its Dh41 billion budget for 2015. The budget also put on a humane face with 71 per cent of expenditure allocated to social sector development and infrastructure spending to create more jobs and stimulate the economic growth of the emirate.

The finance document is prepared in line with the vision of His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, who says “the human being is the wealth of the nation”.

This is the first ‘balanced budget’ with no shortfall projected since the 2008 financial crisis. The document shows that spending is set to increase by nine per cent in the fiscal year 2015 while revenues are projected to be up 11 per cent.

As per details, about 35 per cent of the budget expenditures will be spent on social sector uplift, with its prime share of the allocation going into health, education, housing and community development projects. The government has given equal importance to the infrastructure, transportation and economic sectors as 36 per cent of allocations are reserved for spending under this head to sustain positive economic growth in 2015.

About 22 per cent of the budget is allocated to support the security, justice and safety sectors, while the remaining seven per cent is made available for the government excellence sector.

Abdulrahman Saleh Al Saleh, Director-General of the Government of Dubai’s Department of Finance, said Dubai has managed to move beyond the budget deficit, but kept on increasing expenditure by nine per cent for the fiscal year 2014, which pushes the principality’s macroeconomic growth to be in line with the planned levels.

“The benefit of the budget has reflected the directives of Shaikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Executive Council, who emphasised the need for attention to the social aspect and development of investment incentives, which contributed to the high ranking in global competitiveness.”

Shailesh Dash, chief executive of Al Masah Capital Management, said the 2015 budget shows clear intentions of the government by allocating more funds to the social sector and infrastructure development.

“Dubai has diversified its economy by reducing dependence on oil revenues over a period of time. The government continues its investment in education, health and other social sector, which is a positive and right direction on path to progress and prosperity of the people,” Dash said.

Govt revenues

The 2015 budget, which was approved by Shaikh Mohammed, shows that the government has further reduced its dependence on oil revenues, which now only contributes four per cent to the total income, compared to the five per cent in the fiscal year 2014.

The government has successfully increased public revenues by 11 per cent compared to the corresponding period last year. Revenue from government services, which represent 74 per cent of the total government revenue, increased by 22 per cent, 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 budget, with limited increments on certain government services, and other increments designed to regulate the real estate market.

Tax revenues increased by 12 per cent of the total government revenue, compared to the fiscal year 2014, and came to represent 21 per cent of total government revenues, which include customs and taxes of foreign banks.

The emirate has also cut down the budget allocation from government investment returns to support the increased allocations reinvested, so as to contribute to the development of the emirate’s economic growth.

Govt expenditures

The 2015 expenditures break-up shows that a major allocation of 40 per cent is made for general and administrative expenses, capital expenditures and grants and subsidies in order to provide better government services to citizens and residents in the emirate.

The second major allocation of 37 per cent in government expenditure is reserved for wages and salaries, underscoring the government’s desire to support recruitment and human resource development in the emirate.

The government has made a provision for 2,530 new jobs for citizens during the fiscal year 2015 in line with the continuation of the settlement policy under which it created 1,650 posts in fiscal 2014.

The government continues to support infrastructure projects by allocating 13 per cent of its spending to infrastructure. Dubai is planning to maintain the size of its investments in infrastructure over the next five years.

The interest of the government in dealing with loans seriously is reflected in the six per cent allocation for debt service. About four per cent is allocated for capital expenditures in the fiscal year 2015.

“The break-even point between government revenues and expenditures has come as a result of strict financial policies of the Supreme Fiscal Committee, chaired by Shaikh Ahmed bin Saeed Al Maktoum, Chairman of the Committee, which focused on increasing spending for the development of the sectors such as infrastructure, communications, security, justice and safety, government services and excellence, and social development,” Al Saleh said.

Arif Abdulrahman Ahli, executive director of Budget and Planning in the Department of Finance, said the government’s success in achieving no-deficit balance is a result of applying prudent fiscal policies.

“The 2015 balance has been prepared in accordance with rule of using recurrent revenues to finance recurrent expenditures, which is one of the sound scientific bases of fiscal policy. The operating surplus of Dh3.6 billion will contribute to the financial sustainability of the principality,” he said.

Jamal Hamed Al Marri, executive director of Central Accounts in the Department of Finance, said the Department of Finance is working hard with the government to prepare an implementation plan for the budget and provide the necessary funds in accordance with the priorities of the government.

“The government’s cooperation with the Department of Finance in this regard will enable a smooth and hassle-free implementation of the 2015,” he said.

Experts welcome budget

Jitendra Gianchandani, chairman and managing partner of Jitendra Consulting Group, said the zero-deficit budget suggests that the funds are allocated on calculative based on the priorities using its own resources.

“It also shows that Dubai has learnt from the past mistakes, and has become more focused and disciplined. This budget shows the government has considered the global lifelessness economy and relied on its own strength. This will bring happiness among the society. Lastly, Dubai is following the model of the Malawi,” Gianchandani said.

Saad Maniar, managing partner of Crowe Horwath UAE, said the 2015 budget is indicative of the recovery in the public finances as Dubai’s economic growth quickens. This growth picture is improved by the fact that the approved budget of Dh41 billion is up nine per cent from last year’s balance, rendering this year’s budget largely in surplus.

“Many portfolios will enjoy a boost. The main beneficiaries in particular are the health and social services sector. However, while the availability of additional funding greatly eases the government’s task as it formulates the emirate’s economic vision, no doubt ministries will continue to have huge spending demands, particularly, security and expansion of infrastructure like roads and communications facilities.

“It is important, therefore that fiscal prudence continues because positive economic trends can influence the growth of fiscal deficits if not checked, as increased levels of economic activity generally lead to increase of the above mentioned outlays,” Maniar said. —


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