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UAE raises its defence spending by 41% in 2019 federal budget

UAE raises its defence spending by 41% in 2019 federal budget

The budget has been increased to $2.3 billion in 2019, which is up from the $1.66 billion approved for 2018

Sheikh Mohammed bin Rashid al-Maktoum, the UAE’s Prime Minister and ruler announced on twitter that federal budget spending for 2019 is set to increase by 17.3% percent, to $16.4 billion, up from the $13.9 billion approved for 2018.

He also said the cabinet had approved a three-year federal budget which would not run at a deficit.

Speaking at a press conference in Abu Dhabi on Monday, officials from the UAE’s Ministry of Finance gave a presentation which showed that $2.3 billion has been allocated to defence spending for 2019, up from $1.66 billion approved for 2018.

Officials did not elaborate on the reasons for the rise of the defense budget, or whether it was linked to the country’s military operations in the ongoing war in Yemen. The UAE is part of a Saudi Arabian-led coalition that was formed in 2015 to fight Iran-backed Houthi rebels in the country.

The UAE government also significantly raised its spending on public services to $2.8 billion in 2019, up 25.6% on the $2.23 billion budgeted for 2018.

In the UAE, the federal budget accounts for only a small percentage of total spending by governments, as each individual emirate has its own financial budget. It however gives a good indication about the country’s overall economic performance.

On Sunday, the International Monetary Fund (IMF) increased its forecast for economic growth in the UAE to 2.9% this year and 3.7% next year, Reuters reported, citing an IMF statement released late on Sunday.

Ministry of Finance officials stated that the budget is funded directly by the state and does not include tax revenues. 

The UAE implemented 5% value-added tax (VAT) earlier this year on a variety of consumer goods and services and an excise tax on tobacco and energy drinks at 100% rate and on fizzy drinks (excluding carbonated water) at a 50% in October last year.

Younis al-Khouri, under-secretary at the UAE finance ministry stated to reporters: “All our spending is only coming from the state institutes.”

All six states of the Gulf Cooperation Council (GCC) agreed two years ago to introduce VAT to diversify their sources of income following a sharp fall in oil prices that began in December 2014. However, only Saudi Arabia and the UAE have so far implemented the new tax.

“The unified agreement that was signed by the GCC countries had set the timeline for the (VAT) application from 2018 until the beginning of 2019.So in the coming three months, the GCC countries should also start implementing the value-added tax,” Al-Khouri told reporters further.

Al- Khouri also made it clear that he did not have access to information about which GCC countries will implement VAT and when.

He also reaffirmed that the VAT rate of 5% that is currently applied across the UAE will not change during the first five years of its implementation.

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