The UAE's federal budget is in for a major revamping from 2011 following the government's decision to adopt a "zero-based budgeting" format and increase the budget period to three years.
Obaid Humaid Al Tayer, Minister of State for Financial Affairs, said the "medium-term zero budget" would be in effect from 2011 to 2013. A draft of the budget would be discussed in April 2010, before being presented in its final form in September that year and applied at the beginning of 2011.
The UAE currently has an annual budget and uses an incremental budgeting process. In incremental budgeting, ministry budgeting teams justify only increases over the previous budget, without reference to previous levels of spending.
Under zero-based budgeting, individual departments would have to build each three-year budget from the ground up, including approving all expenditures rather than just increases in expenditures, the ministry said.
"The aim behind the zero-based budget is to improve government services, follow wise financial policies and develop income resources," Al Tayer said yesterday during an explanatory workshop organised at the Emirates Palace Hotel by the Ministry of Finance for directors-general, executive directors and heads of sections who are in charge of preparing budgets at ministries and federal bodies.
"The zero-based budget is an initiative of the MoF to create a budget with a flexible and variable financial system, which differs greatly from what we are used to over the last three decades.
"The zero budget will be drawn up to meet the needs of society, provide transparency and allocate financial resources in a better way. It will give an opportunity to the government to define its financial needs during a three-year period and maximise benefits from public expenditure," Al Tayer said.
He called upon officials of all ministries and federal bodies to co-operate with the MoF to apply the zero budget project.
"The MoF will provide the whole support for the zero budget and will not hesitate to help any federal body. It will hold additional workshops to define the budget's positive aspects," he said.
Younis Khouri, MoF's Director-General, said there was no relation between the new zero budget and international financial crisis or rationalisation of expenditure.
"A zero-based budget was planned before the international financial crisis to improve the performance of the federal budget and meet the needs of ministries and federal bodies," Khouri said.
He said the zero budget's coming into effect from 2011 does not mean the stoppage of spending on the projects under the 2009-2010 budget. The new budget will define the projects of ministries for three years and will be flexible in the distribution of financial resources more efficiently.
Khouri said many countries, including the UK, Singapore and some US states, had already moved to zero-based budgets. A delegation from the MoF will visit a number of countries that have moved to this kind of a budget to look into the optimum way of its application.
The MoF will also set up a team to communicate with ministries and federal bodies regarding any problems they may have in implementing the budget. (With inputs from agencies)