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29 March 2024

Abu Dhabi capital expenditure peaks

Spending climbs to record high against a decline in income. (FILE)

Published
By Nadim Kawach

Capital spending by Abu Dhabi government surged to its highest level in 2009 as the emirate and other members of the UAE sharply boosted their budgets in response to the global fiscal distress, according to official data.

Capital expenditure climbed to a record high relative to total spending despite a steep decline in the emirate’s income because of a fall of nearly 30 per cent in crude prices and a cut in the UAE’s crude output in line with a collective OPEC decision, showed the figures by the Abu Dhabi Statistics Centre.

The report showed spending on development by Abu Dhabi accounted for around 39.2 per cent of the overall expenditure last year compared with nearly 35.7 per cent in 2008 and 23.8 per cent in 2007.

Current spending, involving salaries to the civil servants and other outlays, was cut to one of its lowest levels of around 60.8 per cent last year from 64.3 per cent in 2008 and as high as 76.2 per cent in 2007, the report showed.

Spending on government projects accounted for nearly 10.9 per cent, far higher than the 7.2 per cent allocated in 2008 and 4.8 per cent in the previous year.

The report showed oil and tax export earnings constituted nearly 89.2 per cent of the total revenue last year against 92 per cent in 2008 and 01.6 per cent in 2007.

Revenue by government departments stood at 8.1 per cent in 2009 compared with around 6.4 per cent in 2008 and 6.5 per cent in 2007.

The remaining revenue sources were capital revenue, which accounted for nearly 2.7 per cent last year against 1.6 and 1.9 per cent respectively in the previous two years, according to the report.

It gave no spending or revenue figures as Abu Dhabi emirate traditionally does not public its local budget details.

But financial analysts noted that its budget accounts for nearly two thirds of the UAE’s consolidated financial account (CFA), which covers the federal budget and spending by each emirate.

The Central Bank, which usually publishes CFA details, has not yet released such figures for the past three years but estimates by the Abu Dhabi-based Arab Monetary Fund (AMF) showed the UAE boosted public spending to its highest ever level of Dh289 billion in 2009 despite lower oil prices.

The 2009 expenditure was way above the 2008 spending of Dh254 billion although oil prices in 2008 were nearly 58 per cent higher than in 2009.

The AMF cited official UAE government figures showing revenue in 2009 plunged to around Dh292.6 billion from a record high of Dh450.3 billion in 2008.

It said the decline was a result of a sharp fall in hydrocarbon export earnings to nearly Dh217.5 billion last year from a peak of Dh362.1 billion in 2008.

“Despite the sharp fall, the UAE consolidated finance account recorded a surplus of around Dh3.5 billion in 2009……this is compared with a record budget surplus of nearly Dh197 billion in 2008,” the report said.

Official CFA data for the past four years showed it has recorded massive surpluses. The surplus stood at around Dh75 billion and Dh69 billion in 2006 and 2007 respectively and was achieved despite a steady rise in actual spending.

The UAE has largely boosted expenditure over the past few years to cope with growing domestic development needs. Spending has picked up in the past two years as part of a fiscal stimulus plan launched by the government to mitigate the downward impact of the global economic downturn.

Oil sales provide the bulk of the UAE’s income but sharp fluctuations in crude prices are offset by the country’s massive overseas assets. Unlike most other Gulf nations, the UAE has not borrowed to finance its budget shortfall, resorting instead to return from those assets.