UAE Cabinet Approves Record Federal Budget for 2025

The UAE 2025 federal budget, totaling AED 71.5 billion (US$19.5 billion), emphasizes social welfare, infrastructure, and economic development while projecting a budget surplus of 2.4 percent of GDP.

By Giulia Interesse

The UAE Cabinet has approved its largest federal budget ever for 2025, with projected revenues and expenditures both reaching AED 71.5 billion (US$19.5 billion). This landmark budget reflects the nation’s strong economic position and a balanced approach to fiscal management.

Part of the UAE’s broader 2022-2026 financial strategy, the budget aims to support key areas, such as economic development, infrastructure, and social programs. As the country continues its post-pandemic recovery, the record spending plan highlights the UAE’s focus on sustainable growth and development in critical sectors.

In this article we explore the key components of the 2025 budget, along with the strategic goals and long-term planning of the UAE’s economy.

Economic context

• The UAE’s economic recovery post-pandemic, with a focus on its 3.4 percent GDP growth in Q1 2024.
• Projection of 4 percent GDP growth in 2024 driven by the non-oil sector.
• Non-oil sector growth rates for 2024 (5.2 percent) and 2025 (5.3 percent), driven by foreign investment and structural reforms (100 percent foreign ownership, tax reforms).

Breakdown of budget allocation

The UAE’s 2025 federal budget demonstrates a strong focus on social welfare, government efficiency, infrastructure, and economic growth. The funds are strategically allocated across key sectors to drive the country’s long-term development. Below is a breakdown of how the budget will be distributed.

Social development and pensions (39 percent of total budget)

This sector receives the largest share of the 2025 federal budget, highlighting the UAE’s focus on enhancing the quality of life for its citizens. Of the AED 27.86 billion (US$7.58 billion) allocated, a substantial portion will be directed toward social services and key public sectors:

• Public and higher education: Education remains a cornerstone of the UAE’s national development strategy. The allocation of AED 10 billion (US$2.72 billion) underscores the government’s commitment to improving access to quality education, from primary schooling to higher education institutions. Investments in education aim to cultivate a skilled, innovative workforce capable of meeting the demands of a rapidly evolving global economy.
• Healthcare and community prevention services: The UAE has been continuously investing in healthcare to improve the overall well-being of its population. With AED 75 billion (US$1.56 billion) earmarked for healthcare and prevention services, the country aims to enhance medical infrastructure, improve healthcare delivery, and expand preventive care initiatives to reduce disease risks and promote healthier lifestyles.
• Social affairs: This allocation of AED 3.74 billion (US$1.02 billion) is dedicated to social support programs that ensure the welfare of vulnerable groups within society. The government’s focus on social affairs includes initiatives to support low-income families, provide unemployment assistance, and strengthen social inclusion.
• Pensions: Pensions are an important part of the UAE’s social security system. The AED 71 billion (US$1.55 billion) allocation demonstrates the government’s commitment to providing financial stability and security for retirees, ensuring that senior citizens and former public servants receive the benefits they are entitled to.

Government affairs (35.7 percent of total budget)

The government affairs sector receives the second-largest share of the budget, amounting to AED 25.57 billion (US$6.96 billion). This allocation is aimed at enhancing the efficiency and effectiveness of government operations.

By investing in various government agencies and administrative systems, the UAE seeks to maintain a streamlined, transparent, and responsive public sector that can effectively implement national policies and respond to the needs of its citizens. This includes funding for federal institutions and administrative services that oversee essential public services and regulatory frameworks.

Infrastructure and economic affairs

Infrastructure and economic development are key to the UAE’s continued growth, and this sector has been allocated AED 2.58 billion (US$702 million) in the 2025 budget. This funding is aimed at modernizing the country’s infrastructure, enhancing connectivity, and supporting key economic sectors such as transportation, trade, and logistics.

Investments in infrastructure are crucial for sustaining economic momentum and attracting foreign investment, ensuring that the UAE remains a competitive global business hub.

Financial investments

With AED 2.86 billion (US$778 million) allocated for financial investments, the UAE government is taking a proactive approach to bolster its economic sustainability and growth. This budgetary segment focuses on securing the nation’s financial future by investing in long-term economic development projects.

The funds will likely be directed towards strategic investments in sectors such as innovation, technology, and renewable energy, which are central to the UAE’s economic diversification strategy.

Other federal expenditure

The remaining AED 12.62 billion (US$3.43 billion) is allocated to other federal expenditures, which encompass a variety of essential services and operational needs. This allocation includes funding for national security, judicial systems, environmental conservation, and other government activities that ensure the smooth functioning of the country.

These expenditures play a vital role in supporting the UAE’s overall development agenda by ensuring that key government functions are adequately financed.

Implications for the UAE economy

The UAE’s 2025 federal budget carries significant implications for the nation’s economy. This rise in expenditure reflects the government’s proactive approach to addressing both immediate and long-term needs, ensuring continued support for social programs, infrastructure development, and economic diversification efforts. The increased spending signals the government’s confidence in the country’s financial stability and its ability to sustain growth amid global uncertainties.

Projected budget surplus

Despite the increase in expenditure, the UAE is projected to maintain a budget surplus of 2.4 percent of GDP in 2025, following a forecasted 3 percent surplus for 2024. This strong fiscal position highlights the government’s effective balance of revenue generation and responsible spending, reflecting the country’s economic recovery post-pandemic.

Growth in non-oil sectors, foreign investment, and structural reforms, such as tax policies and full foreign ownership, have driven this recovery. By maintaining a budget surplus, the government can invest in crucial areas without incurring significant debt, enhancing the nation’s fiscal resilience.

Federal vs. emirate-level spending

While the federal budget has increased, it constitutes a smaller share of the UAE’s overall government expenditure because individual emirates establish their own budgets.

For instance, Dubai’s budget for 2024 is estimated at AED 79.1 billion (US$21.54 billion), while Sharjah’s total expenditure is projected at AED 40.83 billion (US$11.12 billion) — indicating significant spending plans at the emirate level.

Consequently, federal spending complements local budgets by addressing national priorities, such as social welfare, healthcare, education, and infrastructure, which benefit all citizens.

Balanced budget strategy

The UAE’s balanced budget strategy is a key aspect of its fiscal policy. Experts, including Daniel Richards from Emirates NBD, highlight that the federal budget tends to aim for a balanced approach, where spending aligns closely with projected revenue.

This approach not only ensures fiscal discipline but also promotes long-term sustainability, as the government can respond flexibly to economic changes without jeopardizing financial stability. By maintaining this balance, the UAE ensures it can continue to fund critical development initiatives while safeguarding its economic health.

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