Pay increases for public-sector workers are adding an extra Dh3.4 billion (US$926 million) to the federal budget every year, according to a senior government official.
This year's increases, which range from 35 to 100 per cent, took effect from last month for workers in most federal departments, said Younis Al Khouri, the director general of the Ministry of Finance.
"It adds Dh3.4bn a year annually," he said.
Workers at the Ministry of Defence and Ministry of Interior were not included, however, he said.
"They were not included simply because their salary scale was still higher than the pay scale of the civil servants," he said.
The Government agreed a draft budget of Dh41.8bn in October, including a small deficit. A month later, Sheikh Khalifa, President of the UAE, announced a series of public sector pay rises for nationals as part of celebrations to mark the 40th National Day. The additional expenditure for the pay rises would add about 8 per cent to this year's draft budget, according to calculations by The National.
As many as 91,000 employees of the federal Government, welfare recipients and retirees received the wage and benefits increases, the ministry said last month.
The rise coincided with high oil prices last year that pushed up the country's hydrocarbon revenue.
The boost to consumer spending as a result of the pay hikes could help offset the cost of the financial outlay for the Government, said Raza Agha, a Mena economist at Royal Bank of Scotland.
"An increase in the UAE's oil wealth means [the country] is in a stronger position to comfortably make these increases," he said. "Because the population is so small and the envelope of financial reserves is so large, I don't see a risk."
Judicial authority employees and workers in the health and education ministries are receiving an amount equal to 100 per cent of their basic salaries.
A total of 7,300 Emirati doctors were also given double bonuses. Some people who receive welfare from the Social Affairs Ministry are receiving 20 per cent extra in their allowances.
The UAE's move follows a wave of similar wage increases handed out to government employees in the GCC. The largest increases were in Qatar, where the government in September announced it was granting salary and allowance rises of up to 120 per cent to public workers.
Some analysts have raised concerns that the rise in public-sector wages across the region may set back efforts to lure nationals from the public to the private sector.
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