Kuwait has recorded budget surplus of KD11.4 billion (Dh156.6bn) for 2007-08 fiscal year, up 59 per cent from a year ago, National Bank of Kuwait said in its latest economic note on the country.
These figures exclude the allocation of 10 per cent of revenues to the Reserve Fund for Future Generations (RFFG). Total revenues increased 23 per cent to reach KD18.9 billion, on the back of higher oil prices. Meanwhile, expenditures dropped by 9.3 per cent owing to the presence of two substantial extraordinary transfers in the previous fiscal year to the Public Institution for Social Security (PIFSS) and the Amiri grant to nationals.
The reported drop in transfers outweighed considerable growth in other expenditure items. Excluding these two extraordinary transfers, expenditures continued to show solid growth of 21 per cent, slightly below the 24 per cent increase registered last year.
It is worth noting that preliminary figures reported in the monthly follow up statements of the Ministry of Finance typically underestimate expenditures, with the full fiscal year's closing figures tending to see significant adjustments in the closing accounts.
For example, the ratio of actual expenditure to budget projections in the 12 month follow-up statements was at 66 per cent compared to an average spending rate of 75 per cent during the prior three years. In contrast, the spending rate as reported in the closing accounts during the past three fiscal years was 95 per cent. This suggests expenditures could be adjusted by 35-45 per cent. As such, the actual budget surplus would be expected between KD 8.5bn and 8.9bn after closing account adjustments are made. Total expenditures excluding extraordinary transfers are expected to grow by 24 per cent.
NBK notes that oil revenues came 138 per cent higher than forecasted, owing to the sharp rise in crude oil prices. Oil revenues rose to KD17.7bn. Kuwait's crude oil production averaged 2.48 million barrels per day (mbd), slightly exceeding its level recorded in the previous fiscal year.
Non-oil revenues witnessed significant growth topping 28 per cent to reach KD1.2bn during the period. With the exception of income from service charges, receipts from all income sources exceeded budget projections, though the former's shortfall was small.
The bulk of the growth in non-oil revenues came from miscellaneous revenues and fees, which were up KD140m and accounted for 52 per cent of the total increase. Service charges rose 15.4 per cent (KD 64 million) compared to an average of 3.8 per cent in the previous two years.
The change in service charges was mostly for water and electricity, and for housing and public facilities.
Revenues from taxes on profits of KSE-listed corporations and foreign corporations registered a 33 per cent increase to reach KD 105m, reflecting the rise in business activity and corporate profitability the previous year. Customs fees rose 19 per cent to reach KD224m. Meanwhile, land sales were down 34 per cent.
NBK noted that despite a drop of 9.3 per cent in total government expenditures, most ministries witnessed increased spending, but were outweighed by the presence of extraordinary transfers in the previous fiscal year, namely a KD2.4bn transfer payments to the Public Institution for Social Security and a KD203m in Amiri grant to the public. However, the good measure of fiscal stance; demand-impacting expenditures – total expenditures excluding inter-governmental transfers, transfers abroad, military procurement, and the estimated cost of fuel used in power generation – showed growth of 17.8 per cent in contrast.
Wages and salaries rose 15.9 per cent compared to 17.1 per cent in the previous year. Spending on wages and salaries reached KD1.95bn.
Expenditure on goods and services rose to KD1.5bn, an increase of 43 per cent, following a 37 per cent increase last year. The hike mainly reflects the rising cost of fuel used in power generation. The share of spending on goods and services increased sharply, from 12.9 per cent in the previous year to 20 per cent as a result.