The UAE government prepares its budget in a participatory method through several steps to make sure that financial resources are spent to meet the society's needs. Before drafting the budget, the government studies the ideas and trends in society. During the budgeting process, Federal National Council receives the draft budget for discussing it amongst their members and for providing feedback to Supreme Council for approval.
The general budget is the financial programme of the federal government used to achieve economic and social development. This is accomplished through the optimal distribution and efficient use of resources within the framework of the federal strategy on the expected spending by federal authorities during the coming fiscal year, provided that income and expenditure are balanced.
According to the Federal Decretal Law No. 26 of 2019 on Public Finance, a separate budget for federal service authorities may be earmarked and submitted to Ministry of Finance (MoF) for approval. Also, all federal authorities may, by virtue of a Cabinet resolution, be assigned to prepare a draft medium-term budget. The Cabinet resolution shall determine the budget’s terms in years provided that it includes annual estimates for both income and expenditure, as approved by the Cabinet.
Every year during the third month of the fiscal year, Minister of Finance issues a circular containing steps for the preparation of the draft budget for the following year. The circular includes budget cap, approved strategic objectives, indicators, revenue forecast and a fixed deadline for submitting a draft budget to move.
Each federal authority determines its programmes, plans and Key Performance Indicators (KPIs) according to the strategic plan approved by the Cabinet within the budget cap. All authorities must also submit their initial forecasts for revenue and expenses allocated to chapters, line items, programmes and activities agreed upon, along with performance measures and efficiency indicators according to the circular issued by the minister, which specifies submission deadline. The fiscal year is composed of 12 months, starting from 1st January and ending on 31st December of each year.
The Federal Budget goes through 7 steps as stated below to be finally approved. In step 5, Federal National Council (the parliamentary body of the UAE) receives the draft budget for discussion. Competent committee in Federal National Council discusses the budget of each sector and provides their feedback to the Supreme Council for approval.
Steps for
Circular Issuance
The minister issues two circulars on the steps of preparing the next year’s draft budget; and the final account of the previous fiscal year.
01
Forecasts
Each federal authority prepares its programs, plans, KPIs, and its initial forecasts for revenue and expenses to submit to the MoF.
02
Draft Budget Law
MoF prepares an annual draft budget law, and a draft resolution of the medium-term plan, and submits both to the UAE Cabinet.
03
Preparing for Final Approval
The Cabinet discusses both drafts for final approval and then submits a draft law for budgets to the FNC.
04
Draft Feedback
The FNC discusses and provides its feedback on the draft and submits it to the Supreme Council (SC) for approval.
05
Review and Acceptance
The Supreme Council reviews the draft law along with the FNC's feedback and notifies MoF on the readiness of the budget law.
06
Budget Law Submission
The budget law is submitted to MoF which, in turn, informs all federal authorities about their allocations.
07
The budgeting process is initiated by releasing a financial circular on preparation of the draft budget for the following fiscal year. This financial circular is issued in accordance with the law, and based on the UAE Cabinet’s Resolution No 1/181 of 2008, which mandates all the ministries and federal authorities to do the following:
Ministries and federal authorities prepare their draft budgets on basis of a medium-term plan
Adopt the principles of a zero-based budgeting system
Work as per the rules and regulations of the consolidated financial procedures manual
Federal budgeting process consists of several phases, namely: planning, preparation, budgeting, review, approval and execution as explained in the chart below.
01
The planning is based on the federal government’s strategy and strategic and sectoral plans of each federal entity.
02
Setting national priorities, and revenue forecasts and assigning CAPEX budget based on priorities and spending targets.
03
Ministries and federal entities prepare their respective draft budgets and submit their draft budgets to MoF.
04
MoF reviews and discusses budget allocation of the ministries and autonomous agencies.
05
Final budget law is prepared and submitted to the Cabinet to discuss, approve and enact the budget law.
06
Copies of the federal budget law are sent to all federal entities along with their respective budgets to begin execution.
The federal budget follows a medium-term budget cycle. The budget cycle must match the strategy cycle of the federal budget. A budget is drawn up for each year within the fiscal period, before the start of the period, and is updated annually within the budget cycle. This principle ensures that the long-term government strategy is reflected in the budget on a consistent basis. The federal budget cycle was developed from a three-year to a five-year budget cycle.
Budget development
In the last 49 years, the UAE’s budget has increased more than 291-fold from AED 200 million in 1972 to AED 58.3 billion in 2021. This has been accomplished through optimal distribution, efficient use of resources, and maintaining a balance between revenue and expenditures.
*Source: Ministry of Finance
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