Kuwait reported a budget deficit of $5.2B (KWD 12.4B) for FY2023/24, marking a 17.9 per cent reduction compared to the previous year, according to the finance ministry on Wednesday. The decrease is attributed to lower oil revenues due to production cuts.
The Gulf state has had to adhere to production reductions imposed by OPEC+, which includes OPEC and its allies like Russia, in response to lower oil prices this year. Kuwait has also made slow progress in diversifying its revenue sources compared to its neighbours.
Oil revenues fell by 19.4 per cent to KWD 21.5B in FY 2023/24, based on an oil price of $86.36 per barrel, compared to KWD26.7 billion the previous year.
Similarly, Kuwait’s non-oil revenues decreased by 1.3 per cent to KWD2.1 billion.
Expenditure on salaries and subsidies totalled KWD 25.2B, representing 81 per cent of overall expenditure, up from KWD 22.4B the previous year.
Kuwait’s fiscal year concludes on March 31. Earlier this year, the state approved its budget for 2024/25, which anticipates a deficit of $19.1B (KWD 5.89B) for the fiscal year starting April 1, 2024, and ending March 31, 2025.
The budget forecasts revenues of KWD 18.66B, a 4.1 per cent decline from the current year’s estimate, while non-oil revenues are expected to rise by 5.7 per cent to KWD2.42 billion.
Kuwait predicts a 6.6 per cent reduction in expenditure for fiscal year 2024/25 to KWD 24.6B, with salaries and subsidies making up 79.4 per cent of total expenditure.
Additionally, the Gulf state plans to allocate 9.3 per cent of total expenditure to capital projects, with other expenses accounting for 11.3 per cent.
The International Monetary Fund noted that the OPEC+ production cuts have hindered Kuwait’s economic recovery from the pandemic’s effects.
“Real economic activity is estimated to have declined by 2.2 per cent in 2023, with the oil sector contracting by 4.3 per cent due to the OPEC+ production quota cut in May, and the non-oil sector growing by only 0.8 per cent amid weak domestic demand,” the fund stated in May.
Kuwait’s economy is expected to contract by an additional 1.4 per cent in 2024, with oil production predicted to fall by another 4.3 per cent due to the OPEC+ quota cut in January.