Cities across the GCC are facing a tricky balancing act.
Rapid population growth and ambitious urban visions demand significant new investment in infrastructure and public services.
Yet an uncertain global environment, oil price volatility, and a stronger focus on fiscal sustainability are reducing capital transfers from central governments to municipalities.
The question for city leaders is clear: How can they fund new projects and maintain service levels without placing undue pressure on citizens by (in-)direct taxation?
Reinvention, Not Austerity
The answer is not to cut expenditure, but to reinvent municipal finance.
Our work with regional municipalities shows what can be possible: targeted transformation can reduce city-level deficits by up to 30%, increase owned revenue sources by 10 to 15%, and convert dormant land into development-ready assets often within 18 months.
Cities can shift from budgeting to unlocking value, from spending to investing, and from managing public funds to stewarding capital.
A Tailored, Phased Approach
Financial maturity varies widely across GCC cities, meaning a one-size-fits-all model will not work.
Instead a phased approach, calibrated to each city’s asset base and institutional readiness, is essential for execution.
Strengthen the Operating Engine
The first step is to rethink how cities generate revenue.
Revenue Generation
Municipalities are often tempted to begin with fee updates or cost cutting.
However, cities with higher ambitions are creating new revenue streams. Leading urban centres globally are embracing:
- Dynamic pricing for parking and congestion zones
- Commercial-use permits for public spaces
- Sponsorship and naming rights
- Monetisation of EV charging infrastructure
Focused transformation can reduce city-level deficits by up to 30%, increase owned sources of revenue by 15%, and convert dormant public land into productive, development-ready zones.
This can all be done in less than 18 months.
Dynamic Alignment: No to One Model
Financial maturity varies across cities; a one-size-fits-all model won’t work. Instead, a phased approach, tailored to each city’s asset base, can close the gap between vision and execution.
The transformation starts with what we call strengthening the operating engine.
Municipalities might be tempted to begin by updating fees or identifying wasteful spending, but those with higher aspirations can create entirely new revenue streams.
How Do We Generate and Manage Revenue?
As a first step, cities should rethink how they generate and manage their revenue.
Leading urban centres are already pulling levers such as dynamic pricing for parking and congestion zones, commercial-use permits for public space, sponsorship and naming rights, and EV charging infrastructure. These ideas could become core sources of revenue for municipalities.
Other cities are unlocking value through zoning changes, special-use districts or development rights linked to long-term planning goals. For example, Hamburg’s HafenCity raised €10 billion in private capital through a value-sharing model with developers.
On the cost side, cities such as Barcelona are applying technology tools to deliver more for less. Predictive-maintenance algorithms, tech-enabled procurement and digitalised public services are helping reduce operating costs while improving service levels.
The result: efficient cities that can prioritise investments across housing, mobility and public amenities without the added tax burden.
Beyond the operating budget lies an even more powerful lever: the assets on a city’s balance sheet.
Private-Public Partnerships in the GCC
Rather than relying solely on public funds, forward-looking cities are raising capital through PPPs, co-investment platforms, and asset-backed Special Purpose Vehicles.
These arrangements allow cities to deliver large projects faster and distribute risk while maintaining long-term control and protecting the public interest.
For example, Dubai’s Roads and Transport Authority is already building major transit corridors using PPPs and monetising its asset base.
Other GCC cities are moving in the same direction. Saudi Arabia’s National Centre for Privatisation and PPP has approved more than 200 projects across 17 sectors, underscoring the scale of private investment in urban infrastructure under Vision 2030.
Oman and Kuwait are following suit, each developing dedicated PPP pipelines for transport and urban development, signalling a region-wide shift toward partnership and asset-based funding models.
Municipal Debt: Sukuk and Revenue-Backed Bonds
Municipal debt tools such as sukuks and revenue-backed bonds are also becoming increasingly prevalent, with repayments tied to specific assets or fee streams.
Cities that reappraise public land and facilities based on market potential rather than historical cost are unlocking borrowing capacity and investor confidence in ways never previously considered.
Copenhagen, for instance, financed a significant share of the construction costs for its metro system by using land rezoned for sale and development as collateral.
Public Land: Catalyst for Growth
Public land itself can become a catalyst for growth.
Whether leased to developers, contributed as an in-kind asset or consolidated into investment-grade platforms, land can finance anchor projects, green corridors or housing districts while avoiding tax increases and maintaining public ownership.
We’ve seen the impact of these levers first hand. In cities we’ve supported across the region, leaders who reimagined their fiscal operations consistently unlocked significant results: trimming deficits, increasing revenue and turning unproductive land into investable opportunities, all the while maintaining or even improving service delivery.
Financial Sustainability
Moreover, financial sustainability makes cities more resilient. It gives them the autonomy to act to set their own agendas and execute on them rather than wait for external funding or react to fiscal shocks.
Ambitious cities are already undertaking such transformations. First movers are positioning themselves not just for efficiency but also for leadership in growth, quality of life, and the ability to attract talent, residents, and capital.
Governance: National Direction to Change Local Municipal Funding
Yet such strategies need an enabling environment to achieve success.
Local governments must be supported by national frameworks that allow them to retain revenue, access capital markets and structure partnerships that deliver long-term value.
It’s time for municipal leaders to stop simply managing the budget and start pursuing the full potential of their cities. The resulting opportunities will accelerate growth and transformation.
NOTE: This Article is Written by Partners, Chady Zein and Charly Nakhoul, and Principals, Marc-Albert Hamalian and Varoon Kapoor, at Strategy& Middle East.
The Analysis Does Not Reflect the Editorial Board of Finance ME.
Stay Up to Date with the Latest at Finance ME!
Saudi Arabia Invests $773 Million in Tourism,
Dubai Metro Blue Line Construction Hits 10% Completion
Legacy Meets Leadership: How are GCC Family Offices Becoming Engines of Innovation and Impact?
