Abu Dhabi is looking at ways to reform its extensive power and water subsidies to cut back on budgetary spending, according to the Washington-based IMF.  

The IMF estimates that subsidies and transfers account for nearly 20 per cent of the emirate’s budget or AED47.8bn ($13bn).

“We discussed it here at the policy level, particularly with the Abu Dhabi government, which indicated it is now looking at ways to streamline its subsidy policies and put in place something different and better targeted,” Harald Finger, the IMF’s head of mission for the UAE, told Reuters news agency.

“This is particularly the case of the electricity and water subsidies,” he added, following a meeting with authorities in Abu Dhabi. “It is probably too early to know exactly what their plan is, but the broad direction in which it is headed is the right one.”

Finger said there was also a need to reform gasoline subsidies, but that he was not aware of any concrete plans to achieve this.

The IMF forecast that the UAE’s economy would grow by 4.5 per cent in 2014, driven by strong non-oil growth.

“Economic recovery has continued at a solid pace, supported by construction, logistics and hospitality,” said Finger in an official statement following the IMF’s visit to the UAE. “Ongoing public projects in Abu Dhabi and continued strength in Dubai’s services sectors have continued to underpin growth.”

“The decline in oil prices by about 20 per cent over the past three months, if sustained, could have a significant impact on oil revenue.”