The UAE’s federal budget for next year, approved by the cabinet on 27 October, shows the emirates are taking a more prudent approach to managing their finances. For the first time in two years, the government’s spending plans do not include a deficit. From 2014 to 2016, the government’s general federal budget amounts to AED140bn ($38.1bn), of which AED46bn is reserved for next year.

In earlier years, the government consistently ended the year in the red. Its strategy has been to gradually reduce its deficit. Figures from the Dubai Economic Council show this is expected to total about AED1.5bn this year after recording a deficit of AED1.8bn in 2012, AED3.8bn in 2011 and AED5.9bn in 2010.

With the country’s gross domestic product (GDP) expected to moderate in the coming years on the back of flattening oil production in Abu Dhabi, it is crucial the UAE avoids running down its reserves. To address this, the UAE will need reforms, the Washington-headquartered IMF warned earlier this year.

The UAE’s 2014 budget focuses on long-term development. Half of the spendings are devoted to social welfare projects. Nearly a quarter, AED9.66bn, has been allocated to education in local universities, while AED18.5bn will go towards enhancing services in the government affairs sector, which includes defence, interior, justice, foreign affairs and other federal departments. A further AED3.7bn is put aside for healthcare and AED1.4bn will be used to develop the housing programme.