Financial sustainability ensures the economic stability of the UAE

The Ministry of Finance said that financial sustainability ensures the economic stability of the UAE and preserves the capabilities of future generations, stressing that individuals avoiding excessive debt and spending according to income rates ensures families’ financial stability and avoids stumbles.

This came in an awareness-raising material allocated to Emirates Today by the Ministry, in which it explained in detail that financial sustainability refers to the government’s ability to maintain the current level of spending, taxes, and its other financial policies, without leading to an unsustainable increase in debt, or the need for amendments. A sudden and drastic loss of revenue or spending, which can harm the economy.

In simpler terms, sustainability is about ensuring that a government can meet its fiscal obligations over the long term, without accumulating unsustainable levels of debt, or resorting to major changes in fiscal policy.

The Ministry of Finance added: “Economic stability is considered one of the most important goals of financial sustainability, as sustainable financial policy helps avoid situations of economic instability, by avoiding excessive debt that may lead to financial crises or require austerity measures.”

Public fiscal sustainability also aims to avoid imposing undue financial burdens on future generations, which is in line with the principle of intergenerational equity, ensuring that current debt obligations do not excessively limit the financial flexibility of future governments.

In addition, sustainable fiscal policies enable governments to invest in productive infrastructure, education, and health care, which enhances long-term economic growth, without compromising fiscal space in the future.

The Ministry of Finance indicated that it has implemented many measures to achieve and maintain financial sustainability, with a focus on wise financial management, economic diversification, and strategic planning, as the Ministry launched its strategic plan 2023-2026, which sets the main goals for enhancing financial sustainability by enabling excellence in financial performance. , which includes designing a roadmap for public finance, and enhancing analytical capabilities to ensure sound financial management within the federal government.

The Ministry also worked on a number of tax initiatives with the aim of diversifying revenues, as the corporate tax was implemented, which represents a major shift in fiscal policy. This initiative aims to enhance economic flexibility and build a stable income flow to support sustainable development projects, in addition to adhering to global standards.

The Ministry of Finance continued in its report: “Individuals can gain valuable insights from the concept of financial sustainability, which can be applied to personal financial management and long-term financial planning, similar to wise debt management. For example, just as governments aim to keep debt-to-GDP ratios manageable, individuals should aim to keep their debt, relative to income, at sustainable levels. “Avoiding excessive debt, and focusing on maintaining a good debt-to-income ratio, leads to greater personal financial stability and resilience, especially in times of economic uncertainty.”

She added: “Just as governments practice balanced budgeting by ensuring that spending is consistent with income levels, individuals can benefit from this principle by setting budgets that fit their earnings and building emergency savings, as this approach helps prevent the need for sudden and radical changes in spending or pattern.” life if unexpected expenses arise.”

In addition, financial sustainability requires reducing reliance on a single source of revenue, such as diversification away from natural resource revenues in some countries. For individuals, having multiple income streams, such as businesses or investments, can increase financial flexibility, as this approach reduces the financial impact caused by the disruption of one source of income.