Kuwait records large surplus in first 7 months

Strong oil prices allied with restrained expenditure allowed Kuwait to record a large surplus in the first seven months of its current fiscal year although it is expected to fall back at the end of the year, according to a key bank in the Gulf oil producer.

The surplus stood at around KD14.7 billion (Dh184 billion) during April-October before allocations to the Reserve Fund for Future Generations (RFFG), up from KD 12.6 billion (Dh157 billion) at the end of September, National Bank of Kuwait (NBK) said, adding that the surplus is equivalent to about 30 per cent of the 2012 GDP.

Despite the prospect of additional surpluses in the remaining five months of the year, the final budget surplus for fiscal year 2012-2013 could still close at around KD12 billion, as recorded spending typically accelerates in the final part of the year, NBK said in a report.

It said total revenue in the first seven months of the fiscal year, which starts on April 1,

climbed to KD 18.9 billion, driven by a 17 per cent y/y surge in oil revenues.

This was supported by a three per cent rise in Kuwait Export Crude prices and a seven per cent increase in oil production over the same period, it said.

Non-oil revenues, on the other hand, were down on lower miscellaneous revenues and fees, likely related to UN compensation payments, it added.

“More than half way into the fiscal year, only 20 per cent of the amount budgeted for the entire year has been spent so far,” the report said.

It showed total public spending reached around KD4.2 billion in the seven month period, compared to KD 6.1 billion a year ago.

Two government bodies – the Ministry of Public Finance (public accounts department) and the Ministry of Defense – accounted for more than half of this decline in total spending, it said.

“But since part of this constitutes inter-governmental transfers, it could have had limited macroeconomic impact.”

The report estimated current spending at KD3.8 billion, nearly KD1.7 billion lower than a year ago. Capital spending stood at KD400 million, down from KD600 million a year earlier.

The majority of the decline stemmed from reduced investment spending by the Ministry of Electricity and Water, it said, adding that this spending can be volatile and depend upon the project cycle in the emirate.

“Our estimate of demand-impacting spending, which excludes some transfers and other items that have minimal effect on economic activity, reached KD 2.7 billion in the period. Even here, spending is KD 1.1 billion lower than the comparable period in the previous fiscal year,” it said.

“In summary, these data confirm that government spending levels have done little to provide the economy with a much-needed boost – while the budget surpluses continue to stack up. Nonetheless, we remain hopeful that reported spending will accelerate in coming months as the government pushes forward with the implementation of its 4-year development plan.”

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