DUBAI: The UAE has been successfully making inroads adjusting fiscal policies to cope with the global weakness in oil prices, an International Monetary Fund study has affirmed.
The study, published by the IMF on its website, commended the progress made by the UAE over the past years to “strengthen its medium-term frameworks for fiscal policymaking and risk analysis.”
“Over the past years, local and federal governments have made progress in strengthening their medium-term frameworks for fiscal policymaking and risk analysis,” the fund said.
The fund particularly noted the spending program of the country’s two biggest emirates, Abu Dhabi and Dubai, which were associated with performance indicators.
“Abu Dhabi produces an internal medium-term fiscal outlook based on realistic oil price assumptions, which orientates its annual budget process. Dubai has a medium-term fiscal framework with three-year budget targets,” the fund said, which were broadly in line with global and regional trends.
The study was published as part of the IMF’s series of country reports, aimed at helping countries better align resource allocation with local and national developments plans under a consolidated Medium-Term Fiscal Framework (MTFF).
The IMF said that the drop in oil prices has highlighted the need to further strengthen the UAE’s medium-term fiscal frameworks.
“The importance of economic diversification has increased with the decline in oil prices. It has become more crucial to align fiscal spending with the goals embodied in the 2021 National Agenda and emirates’ agendas,” it said.
On Abu Dhabi, the fund suggested that long-term fiscal policy goals should be centered on intergenerational equity, which can be achieved by gradually reducing government spending or raising non-oil revenue while maintaining priority spending.
“As the non-oil economy increases, and the country becomes more independent from oil short-term vulnerabilities, a move toward structural balances should be appropriate. This would allow the government to make a policy choice regarding which rule is most appropriate, depending on investment spending needs and their projected medium-term impact on non-oil growth,” the IMF said.