Kuwait’s strong fiscal and external accounts are behind the country’s eminently favourable credit ratings, with Standard & Poor’s recently conferring a long-term rating of AA.

The rating agency is particularly pleased with Kuwait’s continued ability in posting steady surpluses. It estimated a budgetary surplus of 30 per cent of gross domestic product (GDP) for the fiscal year ending March 2015. (Kuwait’s budgetary process runs from April to March.) Undoubtedly, the size of the surplus is exceptional in normal conditions, let alone during the time of relatively low oil prices. The oil sector accounts for 90 per cent of total exports, 80 per cent of state revenues and 60 per cent of nominal GDP.

The statistics confirm the Kuwaiti economy is more dependent on oil than any other GCC country. However, it has developed a history of overestimating planned expenditures and underestimating revenues. This phenomenon reflects local politics, in effect limiting the desires of the country’s strong legislative body.

Parliamentary members in Kuwait are known for pressing the authorities to keep extending fresh grants to nationals, ostensibly for political purposes. Thereby, budgeted figures showing relatively high expenditures and low revenues place brakes on the specific demands of the politicians.

The government prepared the budget for fiscal year 2015-16 with projected revenues of $40.7 billion and expenditures of $64.5 billion, thereby suggesting an extraordinary shortfall. Yet, a conservative oil figure of $45 per barrel was used for calculating oil revenues.

Put another way, the status of Kuwait’s public finance is partly credited for the favourable image concerning the economy at large. A recently-released research paper by Deutsche Bank projects a break even point of $47.5 per barrel for Kuwait’s current fiscal year. This is the lowest within the GCC, notably when compared to that of $118.7 per barrel for Bahrain.

Both the rating agencies Moody’s and Fitch extend satisfactory ratings to Kuwait — Aa2 and AA, respectively. In fact, the three leading rating agencies have one thing in common with regards to Kuwait, namely that of granting it a stable outlook.

Understandably, rating agencies derive comfort from the country’s substantial sovereign wealth fund (SWF). Kuwait boasts a substantial reserve that provides the necessary cushion for stakeholders like creditors and exporters.

The sovereign wealth fund, as managed by Kuwait Investment Authority, stood at $592 billion in June, ranked among the top in the world as estimated by the Sovereign Wealth Institute.

General reserves have received a major boost over recent years after a decision to raise funding set aside as part of the mandate for the future. In 2013 — or before the drop in oil prices — a decision was made to increase the amount set aside — 25 per cent rather than 10 per cent of oil revenues.

Another source of strength for Kuwait concerns its oil production capacity. Output is projected to rise to 3.5 million barrels per day, up from nearly 3.2 million barrels per day.

The BP’s ‘Statistical Review of World Energy’, released in June, estimates Kuwait’s oil reserves at just above 100 billion barrels. This translates into 6 per cent of the world’s proven oil reserves and the second highest within the GCC after Saudi Arabia.

The writer is a Member of Parliament in Bahrain.