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Sat 10 Jan 2009 02:23 PM

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Dubai budgets for $1.1bn 2009 deficit

UPDATE 2: Emirate vows to keep spending on infrastructure, public services, pledge to protect jobs.

The Government of Dubai on Saturday announced its 2009 budget - with a $1.1 billion deficit expected.

A 37.7 billion dirham ($10.2 billion) public sector spending plan was announced in a decree issued by Dubai's ruler Sheikh Mohammad Bin Rashid Al Maktoum, as part of a total government expenditure expected to reach 135 billion dirhams, up 11 percent from last year.

Total revenues for 2009 were estimated to reach 138 billion dirhams, a four percent increase from 2008, based on an oil price of $45 a barrel.

The budget estimates a 26 percent increase in revenue from the public sector to 33.5 billion dirhams in 2009 from 26.5 billion dirhams last year, the website of UAE daily Gulf News reported.

Announcing a first time budget deficit of 4.2 billion dirhams, Nasser Hassan al-Sheikh, director general of Dubai Department of Finance told the website: "The budget for the public and services sector is aimed at conserving the dynamic growth Dubai has witnessed in the past few years."

He added: "The deficit we have is one of the lowest in the Gulf region. The significantly higher budget expenditure and willingness to go for a deficit budget reflects the government's commitment to keep up its spending on key sectors such as public services and infrastructure, despite the economic slow down that has impacted all economies around the world.

"Operationally we are at a surplus of three billion dirhams but if you add investment in infrastructure, the deficit is 4.2 billion dirhams," he said, referring to major projects such as the emirate's metro network and new airport.

He said the government, which employs 70,000 people in 26 departments, had no plans to downsize its staff amid the global economic slowdown. "We have announced a 42 per cent increase in the spending, which means we will need more people. So I do not see a downsizing of operations."

Dubai's government spending under the new budget has been allocated as follows:

22 per cent of government spending to go into the social sector, which includes health services, education, social development, Islamic affairs and public housing.

19 per cent of the total budget will be allocated to the judiciary and security sectors which include the police, immigration and neutralisation, courts and public prosecution.

45 per cent of the budget will go to the Roads and Transport Authority (RTA), Dubai Municipality projects, and the Ports Authority.

14 per cent will be paid towards the economic and services sector which encompasses development, land, tourism, emergency aid, civil aviation and the oil sector.

Al Sheikh told news agency WAM: "Dubai's 2009 budget is reflective of the emirate's continued resilience in the face of increasing strains on the global economy.

"As one of the region's leading economies, Dubai remains highly attractive to long-term and stable businesses and investors and continues to maintain its market-leading position within the GCC and regional markets as the preferred business and leisure destination."

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Skeptical 11 years ago

Once the government collects all the money in 2009 from Salik, speeding fines or some other yet to be announced "fee", the government will have a surplus!! Let's think about it... If Salik was truely set up to re-route drivers during busy times then why are we still charged from 12 midnight to 5am? What about on Friday or holidays? Interesting how the government announces free parking during holidays but no free Salik....why? Because they need the money Salik generates. How many fixed radar are now on our roads? 1,000? 10,000? It is crazy. I see these tall blue radar going up within meters of the old radar. Are we going to be charged twice? I would like to know how much money is generated from these radars.... There will be some kind of "new" charge or fee that we will have to pay to make up for any shortfalls in the budget. Somehow, we will pay!

Morten H 11 years ago

Once again Dubai and UAE as a whole has demonstrated its agility and resolve in addressing fundamental issues. This time by boosting the public budget, very much in synch with what Obama is gearing up for in US. The only difference being the size of the numbers (!) and the fact that here in UAE it is implemented swiftly with a decree from Sheikh Mohammad, while Obama in his turn needs to fight some major political battles before the plans can be effctuated. You gotta love the fact that UAE is pretty much run like a smooth and dynamic enterprise machine - thats great in good times and even better in challenging times.

paul 11 years ago

Morten H, did Dubai predict last year that it would be hit by the global financial crisis? That it's real estate industry was a huge bubble on the verge of collapse? If Dubai was perfectly clever and dynamic, it would have seen these huge banana skins and skillfully avoided them by restraining ridiculous levels of real estate speculation and general inflation. But it did very little, if anything, to stop the overheating. We all saw the results and costs soared over several years. So the need to take *corrective* action now is an indication that mistakes were made. I am sure Dubai is big enough to accept it made mistakes and to try to deal with them. Obama will have to argue his plans with others of course, and need their approval. But that system made it the most wealthy and powerful country in history so don't be too negative about it!

Abdul 11 years ago

There is a relative report (rather the same) that says the allocation also goes to commercial entities owned by the Government of Dubai. It mentions that all such entities will be brought under Investment Corporation of Dubai and DP World. Does this mean that (the entire) Dubai Holding will be under the Investment Corporation of Dubai. If so, will the projects they have put on hold be started again? Will they recall their staff? Or is this just another news to feed off the media?

Martin 11 years ago

Dear Morten. An enterprise machine usually cares about shareholder value rather than environment and social aspects. As we see Dubai cares more about businesses and tourists but what about people that want to live here as long as landlords can play monopoly. And in the end a company cannot build a society.

Jeff 11 years ago

Morten, Your myopia and hopeless optimism astounds me! Wake up and smell the coffee mate, even for a Dubai fanboy like you, surely you cannot put a positive spin on a budget deficit! If that's the case the $1 trillion that the US owes the world is the most positive news story this century. Next you'll be saying that the 11 million unemployed Americans is a great thing and we should up the unemployment levels in the UAE....after all we always try to have the biggest of everything in Dubai!

Morten H 11 years ago

I am merely stating that it makes good sense when UAE Government is swiftly taking steps to increase public spending. You seem to indicate that UAE is responsible for the mess and they should have the seen it coming. Get real, the impact of the crunch took EVERYONE by surprise. As for "shareholder value": Boosting UAE public spending on e.g. long term infrastructrure is nothing but increasing long term shareholder for everyone living in UAE. Trust me, we have all taken a hit over the past months, however this should not ignite a big blame game but rather some sober, strategic decisions. This is not going to mean plain sailing when summer calls, we are in for a lot of ugly times - but I still believe that this region is the best place to ride out the storm.

Morten H 11 years ago

Martin is asking for "UAE shareholder value" and Paul seems to believe that UAE should somehow be held accountable for not seeing the Credit Crunch coming. All I am pointing out is that UAE has reacted responsibly in the current firefighting. Paul, please point WHO exactly saw this coming and is entitled to a "I told you so"! As for enterprise values: Increasing public spending on e.g. infrastructure is nothing but creating long term shareholder value for the people living and working in UAE. Everyone including myself has taken a serious financial hit over the past months, however blame games will not recoup any losses but a collective effort under visionary and inspired leadership possibly will. I am betting on it, what else can we do? Blame it on Bush?

SR 11 years ago

In the current context, the budget is good; right thing to do. But remember budget is a budget, it may or may not be achieved, just an indication for 2009. I am no expert, but I feel there were more pressing things that should have been implemented over the last 02 years that would have improved the current situation; a) When inflation was rising, we continued to follow the US rate cut and kept interest rates low (which of course did prop-up the real estate sector). The result was high credit growth, excess liquidity leading to further inflation. On the other hand low domestic savings. I don't think these are good thing for any economy!!! On the other hand this fuelled the real estate bubble being blown out of proportion, even a slight correction would feel like a major crash; isn't that what we are feeling today?? b)For whatever reasons, we continued with the dollar peg, thus allowing currency speculators to bring-in money. Does anybody remember the level of speculation during December 2007?? Had the currency been de-pegged, it would have given better maneuverability for the government to take control of the economy. Further, so called "hot money" would never have come-in to the economy. Budget is only one indication, there are so many important things that need to be addressed, like bringing the market interest rates down and making credit available so that the economy would start to move-on. Let's wait and see!!!

Morten H 11 years ago

I completely agree with SR - News is one thing, actual realisation is another. However, Dubai has never been shy of bold moves and here is another moment for doing just that. Jeff on the other hand reflects one of the major problems with the financial crisis: Ordinary people refusing to adopt a balanced perspective in the face of gloom and misery. Destructive finger pointing and "love turned to hate" on Dubai - mainly because Dubai is such a poster boy. The whole world is messed up right now, who on Earth believed Dubai would sail through unharmed? How did the World pull itself together after WW2? Well, radical and brave reforms and forward thinking were two key components. Helen Mirren recently put this another way: In crisis like this "I go into my Garden and enjoy the fact that things there are growing utterly unaffected by the outside world, and then I go back and get on with it". My version: Did the crunch keep United from blasting Chelsea to the delight of millions? Life goes on mate, don´t blame or patronize just because we are all in hole. Start climbing.