“We are moving away from incremental budgeting because incremental budgeting presumes a stable environment where current activities persist at roughly the same cost in future years,” the Ministry said in a statement. “Zero-based budgeting is useful for rapidly growing GDP and (the) need for large-scale infrastructure development.”
Unlike in incremental budgeting, where ministry budgeting teams justify only increases over the previous budget, without reference to previous levels of spending, the zero-based budgeting is expected to bring in some level of discipline in planning. Under this regime, the team are expected to plan for three years, and develop a budget accordingly.
Global recession and a slump in crude oil prices have affected UAE. In addition, Dubai is facing a severe downturn in its real estate sector. The UAE federal government said it raised 2009 state expenditure by 21% to 42.2bn dirhams ($11.49bn) in a balanced budget.
