Kuwait’s budget for fiscal year 2018-19 has no room for surprises. There was a projected deficit for a fourth year in a row and following 15 years of surpluses. The traditional practice of underestimating revenues and overestimating expenditures continues.
Kuwait, unlike other Gulf states, runs its fiscal year from April to March. The authorities tend to release a draft budget ahead of the fiscal year in order for the parliament to make deliberations on the various appropriations. Kuwait has an active legislative body with MPs noted for pressing the government to reach out to nationals with generous financial goodies.
Kuwait is also noted for allocating a portion of its oil revenues for future generations, which does leave its imprint on projected budgetary deficits and surpluses. The law stipulates setting aside 10 per cent of generated revenues, before expenses, in a special account.
This concept is designed to ensure that no generation enjoys the country’s wealth at the expense of others, something of a wise decision. In retrospect, the practice proved its usefulness in 1990 for helping financing the war of liberation following Saddam’s invasion.
The 2018-19 budget projects revenues of $50 billion and expenditures of $66.7 billion. The revenue side of the new budget estimates differs materially from that of 2017-18, in turn prepared with income and expenses of $43.6 billion and $65.2 billion, respectively.
The rising revenue is primarily attributed to stronger oil proceeds, with the budget prepared at an estimate of $50 a barrel, up from $45 in 2017-18 and a dismal $35 in 2016-17.
Harping on a rather negative point, Kuwait’s economy is heavily dependent on the petroleum sector for its well-being. As proof, oil and gas collectively account for 88 per cent of total projected revenues and slightly higher with regard to export earnings.
In addition, Kuwait lags other GCC countries concerning efficiency in government spending, as per a study conducted by the World Economic Forum. The survey places the UAE as a global leader, followed by Singapore and the US. The performance of the rest of GCC states is as follows: Qatar in fourth, Saudi Arabia at seventh, Oman in 10th, Bahrain at 22nd spot and Kuwait 59th among the 136 economies that are ranked.
Countries listed in the study are classified according to 114 indicators within 12 core variables, specifically related to infrastructure, education, health, innovation and labour market efficiency. The higher expenditures on the back of stronger revenues should help authorities meet some of the goals related to the “New Kuwait” strategy.
The initiative calls for a diversified economy, advanced infrastructure, quality health care, a creative manpower, a sustainable living environment, and a higher international status.
The schemes compromise expanding capacity at the Kuwait International Airport (KIA) as well as further expansion of the road network and other schemes related to health and education. The Turkish construction company Limak Insaat won a $4.4 billion to build Terminal 2 at KIA, one of the biggest contracts won by a Turkish firm overseas.
The first phase of the project aims at adding capacities to accommodate 13 million passengers annually. Expansion of the airport is vital to ensure the country gets its fair share in the competitive regional aviation industry.
Looking forward, revenues are projected to experience a rise in non-oil income with the introduction of value-added tax, which Kuwait intends to implement in 2019.
Jasim Ali is a Member of Parliament in Bahrain.