Sheikh Mohammed announces Dh196bn expenditure for Dubai over three years

Government budget for 2020-22 is designed to boost overall economy

Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, is profiled in a new chart-topping book
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Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai on Sunday announced a three-year fiscal plan for the emirate with total expenditures set to reach Dh196 billion ($53 billion) until 2022.

It is the first time that Dubai has set out a three-year outlook for its spending plans. For the 2020 fiscal year, the government has earmarked Dh66.4bn in spending, the highest amount the emirate has ever budgeted for.

Spending will primarily focus on sectors including social services, health, education and housing, as part of Dubai's goal to become one of the most liveable cities in the world, according to the Dubai Media Office.

"The budget for the fiscal year 2020 has been approved with total expenditure up by 16.9 per cent compared to the previous year. This comes as part of supporting the Dubai Plan 2021 and the Expo 2020 Dubai, as well as moving forward in support of the emirate's macro economy," said Abdulrahman Al Saleh, director general of the Dubai government's Department of Finance.

To “have a plan” is on one of Sheikh Mohammed’s directives of governance, which drove plans for 2020-22 budget cycle and the government’s aim is to improve performance and strengthen the financial sustainability of the emirate over the next three years, Mr Al Saleh said.

The Dh66.4bn expenditure for the next fiscal year is higher than Dh56.8bn allocated in 2019, which had a specific allocation of Dh9.2bn for Dubai Expo 2020 infrastructure projects.

Spending on construction projects will account for 12 per cent of government expenditure, and includes sums for the continued development of Expo 2020 infrastructure, which will remain in place to serve the emirate's broader economy once the event is over.

The government is also setting aside Dh8bn to develop more infrastructure projects in Dubai and prepare for future commitments as it plans to implement its 2015 Public-Private Partnership law and devise project financing mechanisms for long-term projects.

Salaries and wages will account for 30 per cent of total government spending next year, while 24 per cent will be dedicated to provision of health, education and social services to citizens, and the improvement of public services.

For the first time ever, the government has also created a special reserve equivalent to 3 per cent of total spending, to hedge and prepare for Expo 2020, the media office said.

Dubai will maintain a debt service ratio of no more than 5 per cent of its total expenditure in 2020, which reflects its “disciplined financial policy”, according to the executive director of the DOF's planning and budget sector, Arif Ahli.

The budget plan sends a clear message to the business community that Dubai is pursuing an expansionary fiscal policy, the statement noted.

“We are keen to provide economic incentives [in the budget] with an impact of attracting more investments, and work to improve the emirate's competitive position and implement the goals of the Strategic Plan 2021 and beyond,” Mr Al Saleh said.

The DoF is also looking to implement more initiatives to raise the efficiency of government spending, such as a Unified Procurement Programme for government entities, and forging partnership with the private sector, Mr Ahli said.

The government estimates public revenue will reach Dh64bn in 2020, a 25 per cent year-on-year rise, on the back of government incentives for the private sector.

Dubai's development of a three-year budgetary plan follows in the footsteps of the UAE, which operates on a five-year budget cycle that was set in 2017. The UAE cabinet set a 'zero deficit' federal budget of Dh61.354bn for 2020 in October.

Both Dubai and Abu Dhabi's governments last year exempted companies from administrative fines as part of wider efforts to stimulate business growth and economic development. Dubai, the commercial and trading hub of the Middle East, also lowered fees charged by some its free zones in a bid to increase foreign direct investment and offered incentives to develop small and medium-sized enterprises, which account for bulk of employment in the emirate.

"The budget conveys a very optimistic message with expansionary fiscal policy in full swing," Vijay Valecha, chief investment officer at Dubai-based Century Financial told The National.

“Spending size of 46 per cent combined for infrastructure development, construction and transportation clearly underlines Dubai’s effort in promoting itself as a major commercial hub,” he added.

The expanded budget will "strengthen the financial dynamics of the emirate, thereby creating more jobs and projects that are required to benefit people living and investing in UAE. Whether it is Expo 2020 or social benefits, I see everyone reaping the fruits of success,” said Danube Group founder and chairman Rizwan Sajan.

Next year, the government estimates its non-tax revenue will account for about 60 per cent of total expected revenue. Tax revenue will amount to 29 per cent, while revenue from government investments represents about 5 per cent.

Revenue in 2020 will be driven by accelerating economic activity in the emirate. Oil receipts are estimated to account only for 6 per cent of total projected revenue next year, according to the media office.

The Dubai economy accelerated by 2.1 per cent in the first half of the year, driven by a 6.2 per cent growth in its transportation and storage sectors. The emirate's gross domestic product, at constant prices, reached Dh208bn during the first six months, which was also supported by a 3.3 per cent rise in trading activity, according to the Dubai Statistics Centre data released at the end of November.

Dubai's non-oil foreign trade also surged 6 per cent year-on-year to Dh1.02 trillion during the first nine months of 2019, boosted by contributions from the emirate's free zones. The value of exports from Dubai rose by 23 per cent to Dh118 billion, re-exports grew 4 per cent to Dh312bn, and imports climbed 3 per cent to Dh589bn, the state-run news agency Wam reported on Saturday, citing official data.