Kuwait Projects $19.1 Billion Budget Deficit for 2024-2025 Fiscal Year
Kuwait has approved its state budget for the 2024-2025 fiscal year, forecasting a significant deficit of 5.89 billion Kuwaiti dinars (approximately $19.1 billion). This projection marks a 13.5% decrease from the previous fiscal year’s anticipated deficit.
Revenue and Expenditure Breakdown
The budget outlines total revenues of 18.66 billion dinars, a 4.1% decline from the current year’s estimates. Oil revenues are projected at 16.23 billion dinars, reflecting a 5.4% decrease, while non-oil revenues are expected to rise by 5.7% to 2.42 billion dinars. On the expenditure side, the government plans to spend 24.6 billion dinars, a 6.6% reduction from the previous year. Salaries and subsidies constitute 79.4% of total spending, capital expenditures account for 9.3%, and other expenses make up the remaining 11.3%.
Oil Price Assumptions and Production Levels
The budget is based on an assumed average oil price of $70 per barrel and a daily production rate of 2.7 million barrels. However, the breakeven price for the budget is estimated at $90.7 per barrel, indicating potential challenges if oil prices remain below this threshold.
Declining General Reserve Fund
A significant concern highlighted by the Ministry of Finance is the dwindling liquidity of the General Reserve Fund, which finances the budget deficit. The fund’s liquidity has decreased from 33.6 billion dinars a decade ago to just 2 billion dinars as of March last year, primarily due to continuous withdrawals.
Future Financial Outlook
Looking ahead, Kuwait anticipates cumulative deficits exceeding 26 billion dinars from the fiscal year 2025/2026 to 2028/2029. For the 2025/2026 fiscal year, the projected deficit is approximately 4.4 billion dinars, with expenditures of 26.1 billion dinars and revenues of 21.8 billion dinars. These projections are based on an average oil price of $80 per barrel and a breakeven price of $98 per barrel.
Government’s Stance and Call for Reform
Finance Minister Anwar Al-Mudhaf emphasized the need for fiscal discipline, stating that government spending must be fixed at 24.5 billion dinars in the 2027-2028 budget to control budget growth. He also highlighted the importance of not squandering national wealth and ensuring that proposals contribute positively to the national economy.
Challenges and the Path Forward
Kuwait’s economy faces structural challenges, including a heavy reliance on oil revenues and a high public sector wage bill. The International Monetary Fund has noted that while Kuwait’s economic recovery is ongoing, substantial risks remain, and political gridlock has delayed necessary reforms. The government acknowledges the need for economic diversification and is exploring measures to enhance non-oil revenues and implement fiscal reforms.
In conclusion, Kuwait’s projected budget deficit underscores the urgency for comprehensive economic reforms to ensure long-term fiscal sustainability and reduce dependence on oil revenues.
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