Kuwait Parliament Approves State Budget With $46 Billion Deficit
Kuwait’s parliament approved the state budget for the current fiscal year, projecting a deficit of 14 billion dinars ($46 billion) after making adjustments to account for lower oil prices and a cut in spending.
Expenditure is now estimated at about 21.6 billion dinars after slashing almost 1 billion dinars since the Finance Ministry unveiled its plan in January. The decrease hasn’t affected subsidies, benefits or employees’ rights, according to lawmaker Adnan AbdulSamad, who heads the budgets committee.
Revenue in the fiscal year that started April 1 is projected to drop by more than half to 7.5 billion dinars, under the assumption that oil will average $30 a barrel. The government originally designed the budget by calculating crude at $55, before the pandemic drove prices lower and added pressure on state finances.
The challenge now is how to finance Kuwait’s seventh consecutive shortfall given that parliamentary authorization to sell or refinance debt expired in 2017. The deficit will likely narrow since energy markets have recovered, AbdulSamad said.
The lack of a new public debt law has made it impossible for the government to borrow, forcing it to rely on the General Reserve Fund instead. Liquid assets there are close to being depleted, forcing the Finance Ministry to push through other measures to meet spending needs. State salaries, along with subsidies, account for about 73% of total outlays.
Cash available to the Treasury is running low because the government has failed to take adequate measures to rationalize spending, AbdulSamad said.
The Treasury amassed 50 billion dinars over the last 20 years, which went toward covering the budget gap after oil prices plunged in 2014, he said. The money was also used for foreign aid, arms purchases and paying the deficit of the Public Institution for Social Security.
The stockpile is so depleted that the government wouldn’t be able to pay salaries beyond October, Finance Minister Barak Al-Sheetan said last month.
Stopgap solutions have included a recent purchase of more than 2.2 billion dinars of assets from the Treasury by the country’s wealth fund. Parliament also approved plans to halt, in years when the government runs a deficit, an annual transfer of 10% of oil revenues to the fund.
The liquidity-boosting measures, which also included transferring profits from other state institutions, have added about 8.8 billion dinars to the Treasury, AbdulSamad said.
Kuwait’s deficit last fiscal year widened to 5.64 billion dinars, up almost 69% from a year earlier, on lower-than-expected crude prices and a drop in non-oil revenue.
©2020 Bloomberg L.P.