UAE swings into $11 bln fiscal surplus in 2011 -IMF

by on June 10, 2012 3:17 pm BST

Sun Jun 10, 2012 11:17am EDT

* Surplus at 2.9 pct/GDP in 2011 vs 2.1 pct deficit in 2010

* Consolidated spending up 19 pct at record high

* Revenue jumps 41 pct to 3-year high

* Abu Dhabi posts third deficit in a row – IMF

By Martin Dokoupil

DUBAI, June 10 (Reuters) – The United Arab Emirates’ public
finances swung into a surplus of 2.9 percent of economic output
in 2011 after two years of deficits as robust oil income offset
an increase in government spending, a report by the
International Monetary Fund showed.

The world’s No. 3 oil exporter booked a consolidated fiscal
surplus of 38.6 billion dirhams ($10.5 billion) compared with a
deficit of 23.0 billion, or 2.1 percent of gross domestic
product, in 2010, according to Reuters calculations based on IMF
estimates and government data.

However, the 2011 surplus was only a fraction of fiscal
surpluses enjoyed before the global financial crisis. They
averaged 167 billion dirhams annually in 2006-2008.

The data consolidate the accounts of the federal government
with those of Abu Dhabi and Dubai, the two largest emirates in
the seven-member UAE, as well as Sharjah.

The government has not yet released consolidated figures for
2011. Oil-rich Abu Dhabi, which accounts for around 78 percent
of overall spending in the UAE, does not publish its yearly
budget plans and outcomes.

Government spending in the UAE, the second largest Arab
economy, surged over 19 percent to an estimated all-time high of
401.5 billion dirhams in 2011, according to the IMF. That was
nearly 56 percent above the 2008 level.

Consolidated revenue is estimated to have soared 41 percent
to 440.1 billion dirhams, a three-year high, with hydrocarbon
income accounting for over 82 percent, showed the report, which
the IMF released after consultations with UAE authorities.

Unlike other countries in the Middle East, the UAE has not
been hit by the wave of social unrest which started last year,
but it has raised public spending to avert tensions. It has a
cradle-to-grave welfare system and its per capita income of
$48,200 is one of the highest in the world.

The UAE’s spending on economic development rose 5 percent to
37.3 billion dirhams in 2011, while spending on subsidies and
transfers jumped over 31 percent to an estimated 53.9 billion.


The country’s dependence on income from hydrocarbons has
risen considerably since 2008. The IMF has estimated the oil
price which the UAE needs to balance its budget jumped to $84
per barrel this year from $23 in 2008.

A Reuters poll of analysts in March forecast the UAE would
post a consolidated budget surplus of 5.9 percent of GDP in
2012. But a recent fall of the oil price could prevent that
estimate from being reached; Brent crude is now around
$99, having dropped from above $125 early this year.

In Abu Dhabi alone, the budget is estimated to have remained
in deficit for the third year in a row. However, the gap halved
from the previous year to 33.8 billion dirhams in 2011, the IMF
report showed.

Abu Dhabi’s expenditures grew 21 percent to an estimated
314.7 billion dirhams last year, while income shot up 46 percent
to 280.9 billion. Abu Dhabi, which bailed out Dubai during the
2009 Dubai corporate debt crisis, included a 9.9 billion dirham
transfer to Dubai in its 2011 budget, the IMF estimated.

Dubai’s own budget deficit is estimated to have widened to
17.3 billion dirhams in 2011 from 12.7 billion in 2010. The
IMF’s data for Dubai differ from official figures because the
IMF consolidates the central budget with the Dubai Financial
Support Fund (DFSF) and includes transfers from Abu Dhabi.

Expenditures of the DFSF, which was set up to help troubled
state entities in Dubai, rose to 19.2 billion dirhams in 2011,
the IMF estimated, from 14.7 billion in 2010. That would bring
its overall expenditure to 82.8 billion dirhams since 2009.