UAE cost-cutting given IMF backing

The UAE’s planned government spending cuts will clip 1%off annual economic growth between now and 2020, the IMF said yesterday in its annual update on the country’s economy.

As understood by deVere Acuma, the UAE government plans to cut spending by 4.2% in 2015 – the country’s first spending cut in 13 years. Spending this year will fall to Dh460 billion, down from Dh480bn in 2014, as the Emirates attempts to shake off the fiscal impact of low oil prices and slowing government revenues.

The country has made cuts to energy subsidies and grants, after Abu Dhabi cut electricity tariffs in January, and a nationwide reduction of petroleum subsidies came into effect on August 1st.

That will lead to reduction in government outlays this year of 0.1% of GDP, the IMF said, and to savings of up to 0.6% of GDP annually from next year.

These spending plans mean that the UAE will reach “intergenerational equity” by 2020 – the point at which current levels of per capita government spending can be maintained indefinitely, according to the IMF.

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