Strong oil prices will ally with high output to boost Kuwait’s actual revenue by nearly 30 per cent in the 2013-2014 fiscal year and this will create a massive surplus in the budget, according to a key bank in the oil-rich Gulf emirate.
Kuwait had projected revenue at KD18.1 billion (Dh235 billion) in the current fiscal year, which began on April 1, but actual revenue could soar to KD29.3bn (Dh380bn), National Bank of Kuwait (NBK) said in a study.
“On the income side of the budget, total government revenues are projected to leap by 30 per cent…underlying this is a more upbeat assumption on oil output, which is expected to average 2.7 million bpd, up 23 per cent on a year earlier,” it said.
The report said oil prices would end the year sharply higher than the budgeted average of $70 a barrel, adding that this would push up crude export earnings to one of their highest levels of KD16.9bn (Dh219bn), nearly 93 per cent of the total revenue.
Citing government budget figures, it said the deficit was assumed at KD4.5bn but its forecasts showed it would again turn into a large surplus of KD9.3bn.
Total government spending is targeted to reach KD 21bn, a small drop from a year earlier, according to the report.
It showed current spending is set to slip by around one per cent due to a projected seven per cent year-on-year decline in expenditure on goods and services, driven by a fall in the cost of purchasing fuel.
“Since the government is the major provider of electricity to the domestic market, this is a large budgetary item, by itself accounting for 15 per cent of all current spending. Excluding this item, current spending is budgeted to rise by one per cent.”
Elsewhere in current spending, civilian wages and salaries are projected to see a one per cent rise, the smallest increase for many years, NBK said.
It added that the increase is affected by a sharp fall in “supplementary appropriations”, which are sometimes used as a contingency or to finance expenditure commitments made after departmental targets have been agreed.
Capital spending is budgeted to dip by three per cent to KD2.6bn, its second consecutive annual decline, the report said.
“Overall, these slightly lower spending targets suggest that fiscal policy will represent a mildly contradictory force for the economy this year. However, it is too early to draw that conclusion for sure,” it added.