The looming strike in Kuwait’s oil, gas and petrochemical companies ostensibly reflects the unavoidable fallout associated with hard economic choices. Unions representing workers at the state-owned plants are angered by the move to cut wages and benefits for thousands of dues-paying members.

Hopefully, the planned strike this week would be eventually be called off should negotiators from the state and representatives for employees reach a compromise. However, the underlying causes calling for strikes in the vital petroleum sector are likely to persist, at least in the current environment of low oil prices.

To be sure, the authorities feel the urge to rationalise spending in state-owned enterprises, as part of broader economic reforms, to cope with low oil prices, something unlikely to change materially in the foreseeable future.

The adverse effects of prevailing oil prices are illustrated in the composition of the budget for fiscal year 2016-17. (Kuwait is the exception in the region for running its fiscal year from April to March.) The new budget projects revenues and expenditures of $24.4 billion and $62.2 billion, respectively. The projected deficit stands at $40.2 billion after setting aside a portion of the oil revenues for the benefit of future generations.

This translates into a shortage comprising a hefty 64 per cent of total expenditures. In fact, revenues could only cover 71 per cent of governmental salaries and related costs, in turn estimated at $34.2 billion.

Of all the Gulf countries, Kuwait’s economy is more dependent on oil. By one account, the sector accounts for 90 per cent of export earnings, 80 per cent of treasury revenues and more than 50 per cent of nominal GDP. Certainly, the significance has take a hit due to the plunge in oil prices.

Not surprisingly, employment at oil, gas and petrochemical firms is popular among Kuwaiti nationals due to the attractive compensation packages, including insurance, housing and overtime benefits. Therefore, cutting wages and benefits undermines the very essence of working in this sector compared to the relatively easier jobs in governmental departments.

It is suggested that more than 90 per cent of Kuwaiti nationals in the labour force work for the government and state-owned enterprises. Undoubtedly, this is something extraordinary even by regional standards.

Needless to say, the case to get locals to seek employment in the private sector has been made long before the plunge in oil prices. The argument goes that this is not sustainable, partly due to limited fresh employment opportunities in government departments and state entities. Automation is one reason behind the limited opportunities in the public sector.

Addressing subsidies is another challenge encountering decision-makers. The costs of diverse subsidies amounted to $18 billion during the fiscal year 2015-16. Energy subsidies alone constituted about 7.2 per cent of GDP in 2015.

Projections for 2016 are kinder but remain sizeable. Subsidy costs are put at $9.5 billion, representing 15 per cent plus of total spending during the current fiscal year.

Looking forward, more pressures on public sharing of burdens are on the way, as Kuwait intends to introduce value-added tax early 2018 as part of a planned move by Gulf states. If history is any guide, there is the possibility of Kuwait lagging behind others in introducing VAT, reflecting the local realities and the presence of an elected legislature determined to protect interests of diverse constituents and stakeholders.

Nevertheless, sharing of public finances is a new reality in the Gulf, with Kuwait being no exception.

The writer is a Member of Parliament in Bahrain.