The government of the emirate of Abu Dhabi is looking at ways to reform its system of subsidies for electricity and water, a senior International Monetary Fund official told Reuters on Wednesday, in what would be a landmark move by the emirate.
“We discussed it here at the policy level, particularly with the Abu Dhabi government, which indicated they are now looking at ways to streamline their subsidy policies and put in place something different, something better targeted,” said Harald Finger, the IMF’s head of mission for the United Arab Emirates.
“This is particularly the case of the electricity and water subsidies. It is probably too early to know exactly what is their plan, but the broad direction in which it is headed is the right one,” he said following meetings with local authorities.
Subsidies and transfers weigh heavily on Abu Dhabi’s budget, accounting for nearly 20 percent of annual expenditure or 47.8 billion dirhams ($13.0 billion) this year, the IMF has estimated, using data from the Abu Dhabi Department of Finance.
The plunge of global oil prices over the past few months, to four-year lows of just below $82 per barrel on Wednesday for Brent crude LCOc1, has encouraged some governments in the Gulf to review their generous cradle-to-grave welfare systems. Kuwait and Oman are planning subsidy cuts.-Reuters
