The United Arab Emirates has raised its spending on the defence sector by around 41 percent for 2019, according to Ministry of Finance officials.

On Sunday, the UAE’s Prime Minister and ruler of Dubai, Sheikh Mohammed bin Rashid al-Maktoum, announced on Twitter that federal budget spending for 2019 is set to increase by 17.3 percent, to 60.3 billion dirhams ($16.4 billion), up from 51.4 billion dirhams approved for 2018. Sheikh Mohammed also said the cabinet had approved a three-year federal budget which would not run at a deficit.

Speaking at a press conference in Abu Dhabi on Monday, officials from the UAE’s Ministry of Finance gave a presentation which showed that 8.6 billion dirhams has been allocated to defence spending for 2019, up from 6.1 billion approved for 2018.

However, officials did not elaborate on the reasons for the rise in the defence budget, or whether it was linked to the country’s military operations in the ongoing war in Yemen. The UAE is part of a Saudi Arabian-led coalition that was formed in 2015 to fight Iran-backed Houthi rebels in the country.

The UAE government also significantly raised its spending on public services to 10.3 billion dirhams in 2019, up 25.6 percent on the 8.2 billion dirhams budgeted for 2018.

The federal budget accounts for a small percentage of total spending by governments in the UAE, as each individual emirate has its own financial budget, but it gives a good indication about the country’s overall economic performance.

On Sunday, the International Monetary Fund (IMF) increased its forecast for economic growth in the UAE to 2.9 percent this year and 3.7 percent next year, Reuters reported, citing an IMF statement released late on Sunday.

Ministry of Finance officials said on Monday that the budget is funded directly by the state and does not include tax revenues. 

The UAE implemented 5 percent value-added tax (VAT) earlier this year on a number of consumer goods and services and an excise tax on tobacco and energy drinks at 100 percent rate and on fizzy drinks (excluding carbonated water) at a 50 percent in October last year.

“All our spending is only coming from the state institutes,” Younis al-Khouri, under-secretary at the UAE finance ministry, told reporters on the sidelines of the press conference.

Taxing times

All six states of the Gulf Cooperation Council (GCC) agreed two years ago to introduce VAT to diversify their sources of income following a sharp fall in oil prices that began in December 2014. Howeverm only Saudi Arabia and the UAE have so far implemented the new tax.

“The unified agreement that was signed by the GCC countries had set the timeline for the (VAT) application from 2018 until the beginning of 2019. So in the coming three months, the GCC countries should also start implementing the value-added tax,” Al-Khouri told reporters on the sidelines of the press conference.

Asked if he has information about which GCC countries will implement VAT and when, Al-Khouri said:  “No, I don’t have”.

He also reaffirmed that the VAT rate of 5 percent that is currently applied across the UAE will not change during the first five years of its implementation.

(Reporting by Yasmine Saleh; Editing by Michael Fahy)


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