Ministry of Finance UAE: Functions, Role in Economic Development

The Ministry of Finance (MOF) plays a crucial role in maintaining economic stability in every country. The larger portion of this ministry involves monetary and fiscal policies, as well as regulating banking operations.

Ministry of Finance in the UAE

However, the Ministry of Finance UAE envisions financial stability and fiscal sustainability to achieve its 2031 vision. The operations of the Ministry are imperative to the nature of the services it provides. Therefore, transparency, efficiency, legal compliance, and innovation in financial policies, services, and public spending are the principles of the Ministry. Moreover, MOF collaborates with government entities and international financial institutions to strengthen the financial status of the UAE.

Read More: Legal Compliance defined by Emirati Lawyers

How Does the Ministry of Finance UAE Work?

The Ministry has lots of responsibilities to ensure transparency and accountability in financial transactions across the emirates:

1. Federal Budget Planning and Implementation

The annual federal budget is developed by the Ministry. The budget is maintained as per the financial allocation of resources to the ministries and government departments as well as overseeing the public expenditures. However, the annual budget aims to ensure efficient use of government funds and control the fiscal deficits and surpluses. The budget is decided upon the program and performance-based approach, ensuring alignment with the national long-term goals.

2. Revenue Collection and Management

The federal revenues are monitored by the MOF, such as; tax collection, customs revenues, governmental fees and services, and returns from federal investments and government assets. The UAE has low taxes, but there has been revenue diversification since VAT in 2018 and Corporate Tax in 2023 has been introduced. The MOF ensures that all these taxes are implemented effectively.

3. Management of Public Debt and Fiscal Risk

There are financial risks involved that MOF UAE has to take care of. The Ministry will need to work strategically for public debt by developing effective public debt policies, issuing Islamic bonds, overseeing government liabilities, and doing financial risk assessments. The Debt Management Office (DMO) under the Ministry, ensures market best practices for federal borrowing that align with the sustainability benchmarks.

4. Financial Legislation and Policy Development

The financial laws for the government are drafted by the Ministry. These laws help the government in planning a better financial year as accounting, procurement, and auditing are conducted as per the laws. However, these rules and regulations include; public procurement law, financial procedures manual, budget law, and public-private partnership (PPP) regulations. These laws are updated by the Ministry to protect the public finance systems in the UAE.

5. Digital Transformation and E-Services

The UAE has become advanced recently as it has adopted digital transformation in all sectors. There are smart services and digital platforms that have made a modernised approach toward the finance industry. The e-Dirham system is a national payment system for government services, whereas, smart budgeting tools are used to track and report the budget. There are supplier portals for procurement and tenders in the UAE. Further, the financial data dashboards provide clarity on spending and revenue to use finances effectively.

Having these digital tools increased the efficiency, accessibility, and transparency in the public and private sectors of the UAE.

6. International Financial Relations

The MOF has significance in world financial diplomacy, where it represents the UAE amongst international monetary organizations, bilateral financial agreements, and tax treaties. However, there have been several conferences in the UAE, on green initiatives and finance for sustainable development.

7. Influence of the Ministry of Finance on the UAE Economy

The MOF’s strategies have impacted the UAE economy in a good way, especially when there is fiscal discipline that has attracted foreign investments and encouraged diversity in the economy. Moreover, MOF has also implemented effective strategies for small and medium enterprises (SMEs). It has also been successful in getting funds for the green initiatives.

8. Projects and Initiatives for Sustainability

The Ministry has taken a few initiatives that align with the sustainability goals:

1. Zero-Based Budgeting (ZBB)

All ministries are asked for budgets from the start rather than depending on their previous budgets. It ensures that the resource allocation is done based on the actual needs and performance of the industry.

2. Public-Private Partnership (PPP) Framework

A complete legal framework has been created to encourage investments of the private sector in public services and infrastructure. It has reduced the financial burden on the government.

3. Green Finance and Sustainable Development

The Ministry is supporting green initiatives for sustainability and a clean environment. There have been budgets for climate change projects that align with the UAE’s Net Zero by 2050 strategy.

9. Businesses Working with the Ministry of Finance

Many businesses work with MOF in the UAE to ensure legal and financial compliance for smooth operations. They have to interact with MOF on different levels. For example, businesses want to apply for government tenders and contracts, whereas, they also have to comply with tax policies. Further, businesses also have to get involved in public consultations to understand the financial laws in a better way. The project proposals are also submitted under PPP frameworks and accessibility to government incentives or funding programs are also requested by businesses in the UAE. The Ministry ensures a business-friendly climate by minimizing bureaucratic hurdles and promoting digital interaction.

FAQs

1. What is the primary role of the Ministry of Finance in the UAE?

Budget planning, financial laws, and debt management are some of the responsibilities that are taken by the Ministry of Finance.  

2. Does the Ministry of Finance handle tax collection?

The tax policies are made by the Ministry, but tax collection to the Federal Tax Authority (FTA).

3. How can businesses engage with the Ministry of Finance?

The businesses have various options to interact with the Ministry of Finance. They can give their input in the public consultations conducted for policies or benefit from the public-private partnerships, electronically.

4. What is the eDirham system?

The national digital payment platform is known as e-Dirham. It was introduced by the MOF to ensure secure payments for government services across ministries and departments.

5. Does the Ministry support sustainability initiatives?

The MOF has taken green initiatives seriously for sustainability. However, it has green finance that aligns with the UAE’s Net Zero 2050 targets.