The UAE announced on 19 March that the cabinet had approved a federal draft budget for the year 2001 with total revenues of Dh20.43bn ($5.56bn), total expenditures set at Dh22.66bn ($6.17bn) and a resultant deficit of Dh2.23bn ($607mn). The budget has yet to receive final approval from the country’s President, Shaikh Zayid bin Sultan Al Nuhayyan, but this is believed to be largely a formality. The deficit represents an 8.6% decrease from the previous year as a result of a 2% reduction in spending – revenues are expected to fall by 1.2% in 2001 (see Table below). Similar austerity is a feature of other GCC states’ fiscal planning and reflects predictions that oil export revenues for OPEC and non-OPEC states will fall this year (see related story below). According to the Energy Information Administration of the US, the UAE’s oil export revenues totaled $20.7bn in 2000, but this figure is expected to fall to $19.6bn this year.

However, in some areas, state spending is set to increase. The UAE Minister of Finance, Muhammad Khalfan bin Kharbash, has said that Dh2.55bn ($694mn) will be allocated to state projects, of which Dh1.14bn ($310mn) will go to highway construction compared to Dh390mn ($106mn) the previous year. Current expenditures related to employees are also set to rise to Dh7.7bn ($2.096bn) compared to Dh7.5bn ($2.04bn) in the year 2000. Allocations for ministerial running costs have been set at Dh2.3bn ($626mn) in 2001 compared to Dh2.2bn ($599mn) in 2000. The state will gain, though, from the gradual move to corporatize certain public sector functions. Mr Kharbash said that the allocation for the Federal Electricity and Water Authority has fallen from Dh7.3bn ($1.98bn) in 2000 to Dh100mn ($27.2mn) in 2001 because the entity now operates separately financially.

Despite the UAE’s spending caution, GDP growth estimates for the year 2000 are high and prospects for 2001, at least according to some, are solid. According to the country’s Minister of Planning, Shaikh Humaid bin Ahmad al-Mu'alla, GDP grew by 17% in 2000 reaching Dh223bn ($60.71bn) compared to Dh190.5bn ($51.86bn) in 1999. Mr Mu'alla attributed this rise to growth in the oil economy and the implementation of aggressive investment plans. He also said that, "oil prices are expected to maintain their levels in 2001 as long as OPEC states are able to control production levels and market supplies, and this will reflect on GDP, which is expected to rise to Dh230bn ($62.6bn)." If higher oil revenues are indeed maintained, they will also boost the country’s trade surplus which, according to a report in the Arabic daily al-Hayat on 7 March quoting UAE central bank sources, stood at Dh41.75bn ($11.36bn) in 2000 – an increase of Dh25.52bn ($6.95bn) over the previous year.

Such bullish projections reflect official statements about the country’s drive to become the e-business and trade hub of the Gulf. High-profile IT projects have put the UAE under the international spotlight and contributed to a distinctly upbeat assessment of the economic outlook. However, some analysts argue that while such initiatives are a positive step in the right direction, they should not be allowed to overshadow the fundamental need for economic reform in the UAE (see lead story). The country still suffers from a reputation of dubious transparency and was condemned in the Financial Times on 24 February as being riddled with secrecy and a culture of non-disclosure that has facilitated illegal commodity trading, money laundering and drug smuggling. "Traditional secrecy provides perfect cover, senior officials have acknowledged privately, for foreigners to operate through locally registered companies, to take advantage of Dubai’s trading skills in goods and services of which some regional and Western governments strongly disapprove but are unable to prevent," the paper said.

UAE Budget: 1994-2001

(DhBn)

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