* Wages to double in judiciary, health and education
* Rise effective from January
* Measures to help private consumption, fiscal burden to
grow - analysts
By Martin Dokoupil and Sami Aboudi
DUBAI, Nov 30 The United Arab Emirates on
Wednesday set up a 10 billion dirham ($2.7 billion) fund to help
pay low-income citizens' debts and announced plans to raise
wages of some state employees, which may support its economy but
also increase the fiscal burden.
President Sheikh Khalifa bin Zayed al-Nahayan also ordered a
doubling of salaries of some state employees in the judiciary,
health and education sectors from January to mark the 40th
anniversary of the founding of the UAE, state news agency WAM
The UAE, a federation of seven emirates established in 1971
and one of the top five world oil exporters, has escaped unrest
rocking the Middle East this year. It enjoys one of the world's
highest per capita incomes of around $48,600.
"His Highness ... ordered the establishment of a 10 billion
dirham fund that will take charge of studying and dealing with
loans of low-income citizens, and to process settlements of
personal loans due from them in coordination with the central
bank and lender banks," the agency said.
Senior officials would receive a 35 percent pay increase,
while a 45 percent pay rise would be given to mid-level federal
government employees, WAM said.
It did not say how many state employees will get the
increases, what was the total amount of the wage package or how
it will be financed.
Most UAE fiscal spending occurs at the level of individual
emirates, mainly oil-wealthy Abu Dhabi, with the federal budget
accounting for only 11 percent of the total.
The government has already announced plans to invest $1.6
billion over three years to improve living conditions in less
developed northern emirates and a 70 percent rise in military
pensions among other measures.
The UAE's safe-haven status, high crude prices, strong trade
flows and higher government spending are seen driving its
economy to 3.8 percent growth in 2011, the highest since the
2008 global crisis, a Reuters poll showed.
The National Bureau of Statistics expects a 4.2 percent
expansion this year, much faster than 1.4 percent growth in
2010, when the OPEC member's $297 billion economy had been
recovering from a $25 billion debt restructuring at Dubai's
flagship conglomerate Dubai World.
Economists said the measures should encourage household
spending and bank lending, which has been sluggish following
Dubai's woes, but the impact was hard to quantify due to a lack
"The wage increase will be positive for sentiment and adding
momentum to the recovery in private consumption, which was
already boosted this year by a rise in tourism, especially from
the GCC (Gulf Cooperation Council)," said Monica Malik, chief
economist at EFG-Hermes in Dubai.
Some economists said that the impact of the wage rise on the
economy would be limited as nationals are estimated to make up
only around 20 percent of the country's population, which
according to 2009 government statistics stood at 5 million.
It will, however, increase a fiscal burden for the state.
"Inflation is not a concern. There is a greater fiscal
vulnerability because the fiscal break-even (oil) price has
risen sharply over the years," said Giyas Gokkent, chief
economist at the National Bank of Abu Dhabi.
The oil price the UAE needs to balance its budget on a
consolidated basis is estimated at $82 per barrel this year,
sharply up from just $21 in 2005, he said.
The UAE, which pegs its currency to the dollar, has hundreds
of billions of dollars of sovereign wealth to support its
budgets if oil prices, now trading above $111 per barrel
, were to stay weak over a longer term.
Consumer prices in the UAE dipped by 0.1 percent in October,
which was the first annual price decline since February 2010.
UAE markets ended higher on Wednesday after the news with
Dubai's benchmark up 0.6 percent and Abu Dhabi's index
climbing 0.4 percent.
Sheikh Khalifa also ordered government departments to accord
the children of Emirati women married to foreigners equal
treatment to UAE nationals, WAM said. The order allows children
of Emirati women to apply for UAE citizenship once they reach 18
years of age.