If anything, recently published results relating to fiscal year 2011-12 that ended in March suggest a continuation of ultra-conservative fiscal practices in Kuwait. For the 13th year in a row, the budget ended in a surplus.
In fact, the rule of thumb remains that of having a reversed formula at the end of the day, with a projected deficit turning into a surplus on the back of rising oil income.
Similar to that of Qatar, the fiscal year in Kuwait starts in April, though with no obvious advantages.
Theoretically, the practice should give authorities and legislators an opportunity to work out a realistic budget based on market directions for critical matters such as oil several months into the year.
Oil accounts for around 90 per cent of treasury income. However, authorities continue to prepare the budget assuming extraordinarily conservative oil prices, thereby depressing assumed revenues.
The budget for 2011-12 was prepared with an assumed oil price of $60 (Dh220) per barrel, considerably below prevailing market rates. By one account, the average price for Kuwait's exported oil amounted to $110 per barrel. This fact helps explain the logic behind treasury income reportedly increasing from $48 billion to $106 billion.
Planned expenditures were put at $64 billion, suggesting a hefty surplus of $42 billion. Yet the actual surplus is widely expected to be less on the back of stronger-than-projected spending.
Under pressure
In fact, the authorities have come under pressure over the last few weeks to raise the salaries of public sector employees. Still, some seem not pleased with the offered rise of up to 25 per cent for current employees and half of that for retirees. Understandably, economists have warned of inflationary pressures resulting from the hike in salaries.
At any rate, the surplus amount is sizable compared to original budgetary figures on the one hand and the size of the country's gross domestic product (GDP) on the other.
Kuwait's GDP amounts to $181 billion, the fourth largest in the Gulf Cooperation Council (GCC) after Saudi Arabia, the UAE and Qatar. To be sure, Qatar has succeeded in overtaking Kuwait's position as the third largest GDP in the GCC on the back of development of its petroleum industry, notably the gas sector.
Unlike Kuwait, Qatar has opened up its hydrocarbon sector to international oil firms, in turning helping to turn the country into the largest exporter of liquefied natural gas (LNG). For its part, legislators in Kuwait remain adamant in granting international oil firms the right to further develop the country's upstream energy sector.
Successive parliaments have failed to endorse Project Kuwait. The scheme aims to generate an additional 450,000 barrels per day (bpd) from four fields located in the north and west parts of the country. More significant than the affordable investment of $8 billion, the project requires foreign expertise, technology and know-how.
Many legislators in Kuwait contend that the country's constitution bars foreign firms from owning a stake in the oil sector.
Looking ahead, there seems to be no change of tactics with regard to the assumed figures for fiscal year 2012-13.
Big surplus
Unofficial statistics put total expenditures and revenues at $79 billion and $50 billion. However, the suggested deficit would most likely be reversed to a resounding surplus with the budget assuming an oil price of $65 per barrel.
Prudent as it may appear, the conservative fiscal policy is not necessarily a healthy one, as it denies the authorities the opportunity to plan for development projects and consider streamlining economic policies.
The country needs to use its oil proceeds to diversify the economy away from the petroleum sector.
The writer is a Member of Parliament in Bahrain.
