ARANCA News Report (www.aranca.com) 
London, Thursday, March 05, 2009 :
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UAE To Adopt Zero-Based Budgeting; To Move To 3-year Budgets

In order to prioritise expenditure and retain flexibility to for large-scale infrastructure development, the Ministry of Finance of United Arab Emirates announced that it is revamping federal budget and aims to release them every three years. The first ever three-year budget would run from 2011 to 2013. The Ministry all also said that it is in favour of adopting a “zero-based budgeting” format. The UAE currently follows incremental budgeting and releases budgets every year. 

“We are moving away from incremental budgeting because incremental budgeting presumes a stable environment where current activities persist at roughly the same cost in future years,” the Ministry said in a statement. “Zero-based budgeting is useful for rapidly growing GDP and (the) need for large-scale infrastructure development.” 

Unlike in incremental budgeting, where ministry budgeting teams justify only increases over the previous budget, without reference to previous levels of spending, the zero-based budgeting is expected to bring in some level of discipline in planning. Under this regime, the team are expected to plan for three years, and develop a budget accordingly.  

Global recession and a slump in crude oil prices have affected UAE. In addition, Dubai is facing a severe downturn in its real estate sector. The UAE federal government said it raised 2009 state expenditure by 21% to 42.2bn dirhams ($11.49bn) in a balanced budget.

 

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