UAE will save $1.85bn on subsidy cuts

28 July 2015

Overall spending will be reduced by $5.5bn

  • The UAE will cut subsidy spending by AED6.8bn ($1.85bn) in 2015, according to the Central Bank
  • Total government spending will fall AED20.2bn ($5.5bn) to AED460.6bn
  • Lower oil revenues cut revenues by 22.4 per cent in 2015, to AED430bn

The UAE expects to reduce its subsidy spending by AED6.8bn ($1.85bn) in 2015, or 34.3 per cent, to AED13bn, according to Central Bank Statistics.

Fuel prices across the UAE and water and electricity rates in Abu Dhabi have been reformed this year.

This will contribute to an overall reduction in government spending of AED20.2bn ($5.5bn) as government revenues fall due to lower oil prices. Government spending should total AED460.6bn in 2015.

The draft 2015 budget envisaged a 6.3 per cent increase in federal spending. This increase has been slashed to 0.2 per cent, while local government spending is to fall by 4.9 per cent.

The most important reduction is in grants, the value of which will fall 48.4 per cent to AED11.3bn.

The public sector wage bill will rise by 3.4 per cent to AED48.8bn, while social benefits, the largest area of spending, will rise by 3.7 per cent to AED56.7bn in 2015.

The Central Bank projects that total government revenue will fall by 22.4 per cent in 2015, to 430bn.

Tax revenues to local governments, which include oil royalties, will fall 33.4 per cent, or AED92bn, to AED182.9bn, the lowest since 2010.

The Central Bank therefore predicts a deficit of AED30.6bn or 2.4 per cent of GDP.

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