KUWAIT CITY, 30 June 2005 — Kuwait’s Parliament yesterday passed the budget for the current financial year in the oil-rich emirate, projecting a deficit of $9 billion despite soaring oil prices.
Expenditure for the year that ends March 31 is projected at 7.23 billion dinars ($24.7 billion) against revenues of 4.61 billion dinars ($15.7 billion), leaving a shortfall of 2.62 billion dinars. Of the 45 MPs present, 42 voted in favor and three abstained.
Independent economic reports have nevertheless predicted that Kuwait will boast a huge surplus by the end of the fiscal year, which would be its seventh year successive one, due to strong oil price and high output.
For the last fiscal year, spending was estimated at $21.35 billion and revenues at $11.25 billion with a projected deficit of $10.1 billion. However, unofficial figures show that earnings for the year have reached $30.8 billion and spending $21.4 billion, leaving a surplus of $9.4 billion.
On the back of high oil prices, Kuwait has piled up some $30 billion of surplus in the past six fiscal years. Returns on $100 billion in foreign assets, estimated at around $5 billion annually, are not included in the budget.
By law 10 percent of total revenues, in this case $1.57 billion, is deducted in favor of the Kuwait Fund for Future Generations (KFFG), whose assets are estimated at some $80 billion.
Oil revenues for the current year were estimated at $13.3 billion or 85 percent of total income, while non-oil revenues were projected at $2.4 billion. Oil income was calculated at a conservative price of $21 a barrel, up from last year’s $15, and output at two million barrels per day (bpd).
National Bank of Kuwait (NBK), the largest commercial bank in the emirate, said in a report yesterday that Kuwait is expected to post a surplus of up to $20 billion at the end of the year. It said that price of Kuwaiti oil is forecast to range between $42 and $48 for the year and that oil income will range between $35 billion and $40.7 billion.
The price of Kuwaiti oil currently is more than $50 a barrel and on June 27 hit an all-time high of $52.20. The emirate is producing some 2.6 million bpd, about 300,000 bpd above its OPEC quota. During the budget debate, MPs criticized the government for continuing its conservative policy of calculating oil revenues
Wages of government staff of more than 260,000 employees, more than 70 percent of them Kuwaiti citizens, and the military accounted for about $12 billion, or 48.5 percent of total spending.
Kuwait is still a welfare state where the government provides free cradle-to-grave social services including education and health, and heavily subsidizes power, water and petrol prices.
Last month Parliament passed a law raising salaries of nationals at an annual cost of $480 million. On Monday it approved a law waiving $1 billion worth of power bills for citizens. Defense spending accounts for $3.4 billion, or 14 percent of the budget, of which $860 million is allocated for military procurement.
The budget allocates $3.2 billion for capital spending, which includes new projects, maintenance costs and projects in progress. Kuwait sits on 10 percent of the world’s proven oil reserves and has a native population of just 956,000.