Kuwait Budget Deficit Anticipated to Shrink by 13.5% in 2024-25
In a significant fiscal development, Kuwait is poised to witness a substantial reduction in its budget deficit, projecting a notable decline of 13.5% for the upcoming 2024-25 fiscal year. The Ministry of Finance has released a draft budget that outlines key figures and expectations, providing insights into the economic landscape of the country.
Overview of the Draft Budget
Projected Deficit and Revenues
The anticipated budget shortfall is expected to reach 5.89 billion dinars ($19.15 billion), reflecting a noteworthy improvement. Total revenues, estimated at 18.6 billion dinars, portray a modest 4.1% decrease compared to the preceding fiscal year.
Oil Revenues and Price Assumptions
A substantial portion of Kuwait’s revenue stream is derived from oil, with the draft budget projecting oil revenues at 16.23 billion dinars, indicating a 5.4% reduction based on a calculated oil price of $70 per barrel. The projections hinge on the assumption that Kuwait will produce 2.7 million barrels per day, further emphasizing the reliance on the oil sector.
Expenditure is anticipated to witness a decline of 6.6%, reaching 24.55 billion dinars. A detailed breakdown reveals that salaries and subsidies are estimated to constitute a significant 79.4% of the total expenditure, while capital expenditure is expected to make up 9.3% of the total expenses.
Key Factors Influencing the Budget
While Kuwait experienced its first budget surplus in nine years during the 2022-23 fiscal year, with a surplus of 6.4 billion dinars, the country is not immune to economic challenges. The Finance Ministry acknowledged a liquidity crisis, signaling a need to explore non-oil revenue sources to maintain economic stability.
Oil Revenue Surge
The surge in oil revenues played a pivotal role in Kuwait’s economic rebound, contributing nearly 93% of the government’s income during the 2022-23 fiscal year. Oil revenues amounted to 26.71 billion dinars, marking a substantial 64.7% increase from the previous year. The average oil price for the fiscal year stood at $97.1 per barrel.
Future Outlook and Challenges
Non-Oil Revenue Strategies
Recognizing the imperative to diversify revenue sources, Kuwait’s Finance Ministry, led by Minister Fahd Al-Jarallah, aims to address the liquidity crisis through strategic measures. Al-Jarallah emphasized the need to enhance liquidity and restructure the general reserve, outlining a commitment to exploring avenues beyond oil revenues.
Budget Approval Process
The drafted budget for 2024-25 is subject to review by the National Assembly before proceeding to the Cabinet and the final approval of Kuwait Emir Sheikh Mishal Al-Ahmad Al-Jaber Al-Sabah. This multi-step approval process ensures thorough scrutiny and alignment with the country’s economic goals.
In conclusion, Kuwait’s proactive approach to managing its budget deficit and exploring non-oil revenue streams reflects a commitment to economic resilience. The upcoming fiscal year’s budget, with its meticulous projections and considerations, underscores the nation’s dedication to financial stability in a dynamic global economic landscape.