Kuwait’s economy is showing enough signs of resilience to cope with the plunge in oil prices since the second half of 2014. Newly releases stats suggest the possibility of posting a surplus of $11.5 billion in fiscal year 2014-15 (before the transfer to general reserves).

The figure represents 7.5 per cent of the gross domestic product, though down from an significant surpluses posted in the last five years. This, of course, reflects the drop in revenues by 22 per cent and the rise of expenditures by 13 per cent during the current fiscal year.

Notably, the authorities opted to increase the spending despite the lower oil revenues, which in turn says much about societal imperatives.

Within the Gulf economies, Kuwait stands out for running its fiscal year from April to March. Another exception relates to setting aside part of oil revenues into a special account for the benefit of future generations. The noble practice aims at ensuring that no generation enjoys the country’s resources at the expense of another.

To be sure, Kuwait has been registering substantial budgetary surpluses for 15 consecutive years. Yet, there is the hard task of maintaining this momentum amid tightening market conditions globally. Projections call for a possible budgetary shortage by 2017 or 2021 at current spending levels.

In fact, oil revenue generation was partly complicated by developments in the neutral zone between Kuwait and Saudi Arabia. Production fell by 1.4 per cent due to the temporary closure of an oilfield in the second half of 2014, jointly owned by Kuwait and Saudi Arabia.

The average oil production in Kuwait stood at 2.87 million barrels a day in 2014, down from 2.93 million in 2013.

The oil sector accounts for 90 per cent of total exports, 80 per cent of state revenues and 60 per cent of the nominal GDP. Of all GCC states, Kuwait is the most dependent on oil, and therefore has the least diversified economy.

While still in check, inflation has been edging upwards due to localised reasons. The IMF puts inflation at 3.3 per cent in July, up from an average of 3 per cent in 2014. The spike relates to housing rent increases.

The combined challenges of inflation and the decline in oil production are partly responsible for absence of real GDP growth in 2014. The IMF puts real — i.e., adjusted for inflation — rate at zero in 2014.

Not surprisingly, some but not all recommendations for economic reforms put forward by international agencies are popular. For instance, the idea of taxation is not popular with the government and parliament alike. In September, the government rejected a proposal by the IMF to impose taxes on business profits on the one hand and lift subsidies on public services on the other.

In reality, cost of subsidies are projected to cost around $18 billion during fiscal year 2015-16. Energy subsidy alone is substantial by any standard, constituting around 7.2 per cent of GDP in 2015. It seems that officials drive comfort from the positive effects of subsidies like shielding Kuwait from the challenges posed by the Arab Spring.

Looking forward, a concept gaining acceptance focuses on public-private partnerships for infrastructure projects. The idea of PPPs rests on the notion of private investors taking stakes in projects, enduring risks and sharing profits.

The writer is a Member of Parliament in Bahrain.