Dubai unveils record budget for 2020

Dubai has unveiled its biggest ever government spending plan as its seeks to stimulate economic growth in the emirate and deliver Dubai Expo 2020.

Announcing a three-year budget cycle covering 2020-2022, the Government of Dubai said on 29 December that Sheikh Mohammed bin Rashid al-Maktoum, Ruler of Dubai, had approved a three-year spending programme of AED 196bn ($53.4bn).

The approval of Public Budget Law No 12 of 2019 includes approval for planned government spending of AED66.4bn ($18.1bn) in 2020, Dubai’s biggest ever annual budget expenditure and a 16.9 per cent increase on planned government spending in 2019.

About 12 per cent of government spending in 2020, AED8bn ($2.2bn), has been committed towards infrastructure projects.

The 2020 budget also includes a ‘special reserve’ of three per cent of expenditure allocated to Expo 2020 with the objective of making the event “the best in Expo’s history.”

Dubai Expo 2020 opens in October 2020 and runs for six months.

Fiscal deficit

Government revenues in 2020 are budgeted to be AED64bn ($17.42bn), an increase of 25 per cent on budgeted revenues in 2019.

Revenues had been projected to grow by just 1.2 per cent in the 2019 budget.

Dubai’s overall fiscal deficit is projected at AED2.4bn ($653.5m), narrowing from a budgeted AED5.8bn ($1.57bn) in 2019.

The government said that it could achieve an operating surplus of AED1.96bn ($533.69m) in 2020 when investment spending and non-recurring revenues are excluded.

In 2019, Dubai budgeted an operating surplus of AED850m ($231.44m).

2020-2022 cycle

The planned increase in spending is “part of supporting the Dubai Plan 2021 and the Expo 2020 Dubai, as well as moving forward in support of the emirate’s macro economy,” said Abdulrahman Saleh al-Saleh, director-general of the Government of Dubai’s Department of Finance.

Dubai projects economic growth of 3.2 per cent in 2020, up from the 2.1 per cent growth forecast for 2019.

In 2018, Dubai’s economy grew by about 1.9 per cent, its slowest rate of growth since the pace since the 2009 debt crisis.

A government statement said: “The 2020 budget seeks to realise the emirate’s ambitions to stimulate the entire economy and support the organisation of the largest and most prominent ‘Expo 2020 Dubai’ in the history of the prestigious global exhibition.”

“The three-year budget cycle meets the aspirations of Dubai’s future, and confirms its determination to continue raising people’s happiness and stimulating entrepreneurship,” it said.

“The plan highlights the Government of Dubai’s keenness to provide the highest levels of economic stability and stimulus to the emirate’s business sectors,” said the government. “It also gives a clear picture of the government’s economic goals in the next three years, which supports the medium-term planning of the economic sectors and provides a clearer view of the private sector.

Spending highlights

  • Total government expenditure in 2020 is budgeted at AED 66.4bn ($18.1bn), up 16.9 per cent on the previous year;

  • Social development spending accounts for 30 per cent of Dubai’s total expenditure;

  • Salary and wage allowances account for 30 per cent of Dubai’s total government spending;

  • Grant and support expenditure accounts for 24 per cent of Dubai’s 2020 budget;

  • AED8bn ($2.2bn), about 12 per cent, is committed to infrastructure projects, including the completion of some projects, the activation of the Public Private Partnership Law and the development of project financing mechanisms through long-term financing;

  • For the first time, Dubai’s budget includes a ‘special reserve’ of three per cent of total expenditure, which it said was “in accordance with the principle of hedging and preparing for the Expo 2020 period, as well as the objective of making the event the best in Expo’s history.”

About 19 per cent of total expenditure has been allocated to support security, justice and safety.

Dubai’s keenness to develop its economy, infrastructure and transportation has led to an allocation of 46 per cent of total spending towards the sector.

Dubai will maintain a debt service rate of no more than five per cent of its total expenditure in the fiscal year.

Revenues

  • Dubai’s total government revenues in 2020 are budgeted to be AED64bn ($17.42bn), an increase of 25 per cent on budgeted revenues in 2019;

  • Non-tax revenues account for 60 per cent of Dubai’s total expected revenue;

  • Tax revenues account for 29 per cent of income;

  • Revenues from government investments represent five per cent of Dubai’s budgeted revenues in 2020;

  • Oil revenues account only for six per cent of total projected revenues.

The government said that the projected increase in revenues comes despite the economic incentive measures adopted by the government to reduce some fees and freeze the increase in fees for three years, and the decision to not impose any new fees without providing a new service.

“The Department of Finance spares no effort to consolidate the elements of government competitiveness of the emirate, and is keen to develop programmes that improve the performance of public finance and achieve financial excellence,” Jamal Hamid al-Marri, executive director, Central Accounts Sector, said.

EXPO 2020, BusinessSteven LeckieDubai BudgetComment