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09 December 2023

Rise in oil prices lifts UAE spending to $52bn in 2008

Oil sales account for more than two-third of the UAE's total income. (AP)

By Nadim Kawach

The UAE boosted spending to its highest level of more than $52 billion (Dh191bn) in 2008 to take advantage of a sharp increase in oil prices, official data showed yesterday.

The level was nearly $9bn above the 2007 expenditure but the balance remained in a large surplus after the country's total crude export income swelled to a record $91bn last year, showed the joint Arab economic report for 2009, published by the Arab League and the Abu Dhabi-based Arab Monetary Fund.

From around $43.49bn in 2007, the UAE's consolidated finance account (CFA), covering the federal budget and spending by each emirate, surged to an all time high of $52.01bn in 2008. Budgetary revenues also climbed from around $62.12bn to nearly $67.1bn in the same period, the report showed.

Despite the surge in actual expenditure, the CFA recorded another surplus for the fourth successive year, standing at around $15.09bn in 2008 compared with $18.62bn in 2007.

Analysts explained that budgetary revenues were far below actual oil export earnings because Abu Dhabi, the largest oil producer in the UAE, channels part of its annual earnings to Abu Dhabi Investment Authority, which was created nearly four decades ago to tap the emirate's oil income in long-term investment.

Oil sales account for more than two-third of the UAE's total income and the surge in crude prices to a record average of around $95 in 2008 boosted its oil revenues by more than 50 per cent during that year over 2007.

Experts believe the UAE could still record a tiny fiscal surplus this year despite an expected surge in expenditure as part of the country's stimulus measures aimed at cushioning the impact of the global financial distress.

"Following the recent improvement in oil prices, the UAE could record a small surplus. Even if it has a deficit, it will not be a problem for a country which has one of the largest sovereign wealth funds in the world," a UAE banker said.

Estimates by the US Council on Foreign Relations showed Adia's assets plunged by around $183bn as a result of the global financial crisis in 2008. But there was a net inflow of nearly $59bn because of the sharp increase in the UAE's oil export revenues. At the end of 2008, Adia controlled around $328bn compared with nearly $453bn at the end of 2007, CFR said.

The decline depressed the country's investment income to nearly Dh30bn in 2008 from around Dh46.3bn in 2007, according to the IMF.

Unlike Saudi Arabia and other Gulf nations, the UAE has not resorted to domestic borrowing to shore up its budget shortfalls. Instead, it has used its investment returns to bridge the gap, which hit an all time high of around Dh29.39bn in 2003 after a sharp increase in spending.

The UAE has not yet published CFA details for 2008 but budgets for the previous two years showed they recorded their highest surpluses of around Dh75.1bn in 2006 and Dh69bn in 2007.


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