Mubasher: The Kuwaiti government has posted a budget deficit of KWD 4.6 billion for the fiscal year 2015/2016, according to a report issued by NBK on Friday.
The deficit, before the transfer to the Future Generations Fund (FGF), reached 13.4% of the gross domestic product (GDP) and was the first in 17 years when compared to an average budget surplus of 21% of GDP recorded during the previous five years.
“The large deficit is the result of a sharp decline in oil prices, as the Kuwaiti government remains committed to its development plan projects,” NBK noted.
NBK forecasts a similar deficit of 13% of GDP for FY16/17 on decreasing oil prices.
Revenues were down by 45% to stand at KWD 13.6 billion in FY15/16, NBK said.
Crude oil prices averaged $43 per barrel in FY15/16, 47% lower than the year before. During the same period, oil production saw a small increase of 1.5% to average 2.9 million barrels per day.
Thus, oil revenues plunged 46% to KWD 12.1 billion or 35% of GDP; the lowest ratio in ten years.
“A 38% decline in nonoil revenues was due to a government decision to postpone the repayment of the remaining KWD 1.4 billion in Iraqi reparations due from the UN Compensation Commission (UNCC) until early 2017. Other nonoil revenues actually improved in FY15/16, rising by 11%,” NBK clarified.
NBK expects another deficit of around 13% of GDP in FY16/17 as oil prices remain relatively low and government spending sees a small decrease.
Revenues are projected to be largely unchanged from the prior year, with the price of oil likely to remain relatively low averaging around $44 per barrel.
“Even though nonoil revenues are seen growing by 11% as per official budget expectations, the impact of this on total revenues is relatively limited. Meanwhile, spending is seen decreasing by about 2%, in part thanks to the reduction in fuel subsidies expected to take effect at the start of September, and which is expected to save the government around KWD 130 million a year,” according to NBK’s statement.
