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28 March 2024

Capital spending peaks in 2009

Emirates Palace, Abu Dhabi. (SUPPLIED)

Published
By Nadim Kawach

Abu Dhabi more than doubled capital spending to a record high level in 2009 as part of massive fiscal expansion measures taken by the emirate to mitigate the impact of the 2008 global fiscal crisis, official data showed on Monday.

Total expenditure also soared by around 33 per cent despite a staggering 53 per cent decline in the emirate’s revenue because of lower crude prices and production, the Abu Dhabi Department of Economic Development (ADDED) said in a new part of its annual economic report.

“The year 2009 witnessed high growth rate in expenditures by nearly 33 per cent, compared to the public expenditure in 2008,” the report said.

It said capital spending rocketed by around 102.8 per cent while there was a similar increase in expenditure on government projects and around 31.3 per cent growth in capital transfers by the Abu Dhabi government.

The report said spending sharply increased although oil export earnings plummeted by nearly 53 per cent mainly because of a drop of more than $30 a barrel in crude prices and a cut of about 200,000 in Abu Dhabi’s oil output.

“It should be noted that the contribution of oil to public revenue decreased while the contribution of current revenue and capital income by government departments in public revenue increased,” the report said.

“The oil income’s contribution to public revenue fell from around 92 per cent in 2008 to 89.2 per cent in 2009 while the contribution of the departments' current revenue grew from around 6.4 to 8.1 per cent…capital income went up from 1.6 to 2.7 per cent…the drop in oil revenue is mainly attributed to the fall in oil prices, in 2009 and the decrease in oil exports during the same year.”

A breakdown showed capital spending surged to a record high of around 39.2 per cent of total expenditure in 2009 compared with 35.7 per cent in 2008. Spending on government projects swelled to about 10.9 per cent from 7.2 per cent while capital transfers slipped to 27.9 from 28.3 per cent.

The report gave no figures on the size of expenditure but Abu Dhabi’s budget accounts for nearly two thirds of the UAE’s consolidated financial account (CFA), which covers the federal budget and spending by each emirate.

Estimates by the Abu Dhabi-based Arab Monetary Fund (AMF), a key Arab League institution, showed the UAE boosted public spending to its highest ever level of Dh289 billion in 2009 despite a sharp decline in oil revenue.

The expenditure last year was way above the 2008 CFA spending of nearly Dh254 billion although oil prices in 2008 were nearly 58 per cent higher than in 2009, the AMF said, citing UAE government data.

The AMF report showed 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.

The UAE has not yet released budget details for 2008 and 2009 but official data for its CFA in 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 post-crisis fiscal stimulus.