August 2 marked the anniversary of the infamous Iraqi invasion of Kuwait in 1990. Interestingly, Kuwait’s economic might played a critical role in liberating the country subsequently.

Specifically, the leadership employed part of its sovereign wealth funds to finance the war of liberation and provide financial support to Kuwaiti nationals living inside and outside the country. The wealth provided the necessary cushion for overcoming a critical challenge, a self-complementing approach.

The latest report of the Sovereign Wealth Institute puts the value of Kuwait’s SWF at a robust $524 billion; this places it in the top 10 countries with regards to size of their sovereign wealth. The UAE leads the rankings.

Purportedly, Kuwait has not experienced a material fall in the size of its sovereign wealth on the back of falling oil prices since mid-2014, clearly reflecting a prudent and conservative management style. Kuwait was one of the first countries in the Middle East and North Africa countries to establish specialised institutions to handle investments of the country’s wealth.

Kuwait focused on investing in the downstream oil sector in Europe, as part of efforts to get maximum utility of the petroleum industry. Examples include owning petrol stations, which was a strategy seeking ways to generate funds beyond the practice of merely exporting crude oil. Retail sales of petroleum products allow for generating maximum utility of oil, a clever strategy.

Public debt too is not a cause of concern, partly due to availability of sovereign wealth. By one account, the relative share of Kuwait’s bonds amounts to 4 per cent of total outstanding in the MENA region, up from a mere 1 per cent in 2014. In other words, value of sovereign bonds rose from $5.3 billion in 2014 to

$28.5 billion in the first-half of 2017 to help finance the budget deficit.

It is not wrong to claim that Kuwait’s outstanding public debt remains under control notwithstanding the recent rise.

Nevertheless, the one area requiring attention is that of employment in the public sector. It is contended that governmental institutions and companies provide employment for about 90 per cent of Kuwait nationals, which is certainly high by any standard.

Some analysts believe that this employment reality is not sustainable given the financial challenges associated with a low oil price environment. Oil prices are not expected to move upward in the foreseeable future, as the oil market suffers from an abundance of supply mainly from the US and other non-Opec countries. The US’s output is on par with that of Saudi Arabia.

Of the Gulf economies, Kuwait’s economy is the most dependent on the oil sector, representing some 88 per cent of treasury revenues and oil export earnings besides 40 per cent of GDP.

Kuwaiti officials prepared the budget for fiscal 2017-18 with revenues and expenditures of $43.6 billion and $65.2 billion, respectively. The deficit is about 25 per cent below that in the 2016-17 budget, which ended in March. Unlike other GCC states, Kuwait’s financial year starts in April.

Kuwait enjoys fairly sold financial conditions, as manifested by the sovereign funds and the absence of runaway debt. This allows for economic reforms and enhanced management of public finance.

The writer is a Member of Parliament in Bahrain.