Budget boost for social services

Federal government spending on social services, health and education is to rise by 2 per cent to Dh41.8 billion.

ABU DHABI // Spending on social services, health care and higher education will be boosted next year after Cabinet ministers approved a draft budget yesterday that increases federal government expenditure by about 2 per cent.

Priority will be given to social services, health and education for Emiratis and the upgrade of government services, said the Prime Minister, Sheikh Mohammed bin Rashid.

Spending for next year is expected to reach Dh41.8 billion, against revenue forecast at Dh41.4bn. The Government last year proposed a Dh41bn spending plan for the current budget.

Next year, spending on social services will rise to Dh19.7bn, accounting for 47 per cent of total federal expenditure.

The government has been increasing spending on social projects in recent months. In March, it approved a Dh5.7bn package of water and infrastructure projects for the northern emirates. A total of Dh7bn of housing loans would be included in the government's budget, it said in June.

Spending on health care and higher education will rise by Dh100m next year under the plan. The education sector will be allocated Dh8.2bn, 20 per cent of total spending. Infrastructure spending will come to a total of Dh1.6bn.

As much as 42 per cent of the budget will be allocated to spending on federal government affairs such as the ministries of Interior, Justice, Foreign Affairs and Defence.

Historically, federal spending forms only about 15 to 20 per cent of overall government spending. Expenditure by individual emirates is considerably greater. Nevertheless, the federal budget provides a useful gauge of the readiness of the country's leaders to spend.

Next year's budget will represent the second consecutive year in which spending by the federal government overshoots revenues. The consecutive deficits are a sharp contrast with the balanced-budget philosophy that prevailed between 2008 and last year.

The proposed budget for 2012 aims to trim the deficit to Dh400 million from the Dh3 billion shortfall expected in the current year. With such a large cut in the budget deficit, analysts said the announcement of a modest increased in public spending plans had been anticipated.

"I have been aware of greater fiscal restraint over the past year so a major increase in public spending next year wasn't expected," said Simon Williams, chief economist of the Mena region for HSBC.

Next year's federal budget is part of a three year spending plan until 2013, a measure seen by observers as helping the country to prioritise its expenditure.