ABU DHABI, 7 January 2007 — High oil revenues have ended an era of painful deficits for the United Arab Emirates, but high defense spending and outward remittances by expatriate workers continue to weigh heavily on the balance of payments, according to official figures. Despite efforts to bring expenditures under control, defense spending still accounts for up to 20 percent of the UAE’s overall spending, Central Bank figures show.
Cash remittances by Asians and other expatriates to their home countries have meanwhile remained as high as 17 percent of gross domestic product, according to the Abu Dhabi Chamber of Commerce and Industry. In 2005, the UAE allocated $6.45 billion to defense and security, which accounted for 19.4 percent of the actual spending of $33.3 billion — a proportion thought to have been the same in 2006.
The balance of payments recorded its first surplus in nearly a decade in 2004 when it reached about $3.5 billion, followed by $2.5 billion in 2005, figures from the Central Bank showed. The Finance Ministry expects another surplus in 2006. While the surge in oil prices sharply boosted the UAE’s revenues and economy, it only worsened the remittances problem as it encouraged expatriates to remit more funds.
From around $10.3 billion in 2004, cash transfers made by the nearly 2.3 million expatriate workers in the UAE soared to $14 billion in 2005, and were projected by the Abu Dhabi Chamber of Commerce and Industry to peak at about $16 billion in 2006.
