UAE Federal Budgeting Framework 2011–2013

The framework for the federal budgeting and budget execution has five major elements that all comply with international best practices and increase transparency and efficiency. These elements can be grouped under the following headings:

1. Alignment of budget with government strategy through program budgeting and performance monitoring
2. Seamless integration of annual budgets in three-year budget cycles
3. Definition of sectoral spending targets and Ministry/Autonomous Agent budget caps by FiCom
4. Integration of CAPEX and OPEX budgeting
5. Application of zero-based budgeting.

• Alignment of budget with government strategy through program budgeting and performance monitoring: During the budgeting process, the federal strategy is translated into a program structure that consists of high-level strategic objectives and directly implementable programs and activities. Sufficient resources are allocated to each layer of the program structure. The effectiveness of spending in this program budget is monitored, and the performance will be used as an input for future budgeting processes.
• Seamless integration of annual budgets in three-year budget cycles: The UAE federal government follows a three-year budgeting cycle.  The three-year period is synchronised with the three-year federal strategy. Within the three-year budget, separate allocations are made for each year.
• Definition of sectoral spending targets and Ministry/Autonomous Agency budget caps by FiCom:. FiCom will define sectoral spending targets and budget caps for each Ministry/Autonomous Agency. These will be communicated in the budget circular. Ministries/Autonomous Agencies must not propose draft budgets to the Ministry of Finance that exceed these budget caps.
• Integration of CAPEX and OPEX budgeting: Draft budgets of Ministries/ Autonomous Agencies include budgets for both capital and operating expenditures. The respective CAPEX budget for each entity will be defined by FiCom and will be communicated to the entities as an input for their internal budgeting process, together with their budget cap.
• Application of zero-based budgeting: When building three-year budgets, Ministries/Autonomous Agencies must apply a process of zero-based budgeting. Zero-based budgeting contains three steps: bottom-up cost allocation without prior assumptions, the challenging of budget proposals by using benchmarks, and prioritising budgets between activities. The zero-based budgeting exercise is comprehensive and covers all areas of spending.