Cheap Oil Cuts Kuwait Nine-Month Budget Surplus 26% – NBK

Kuwait’s government budget surplus shrank 26 per cent in the first nine months of this fiscal year as lower oil prices cut revenue sharply, analysts at National Bank of Kuwait (NBK) calculated, using Ministry of Finance data.

The surplus totalled KD10.6 billion ($35.9 billion) between April and December, down from KD14.3 billion a year earlier.

The plunge in oil prices since last June has squeezed state finances and if Brent crude stays at its current level of around $60 a barrel in the coming year, some analysts believe Kuwait could run a budget deficit or come close to it.

NBK, the country’s largest bank, predicted the surplus for the full fiscal year to the end of March would total KD4.1 billion, the smallest surplus in six years, though it would still be large by international standards at 8.7 per cent of gross domestic product.

Government spending rose 10 percent to KD10.6 billion in the first nine months of the fiscal year. Capital spending surged 31 per cent to KD900 million, or 39 per cent of the budget’s annual allocation for capital spending.

Actual expenditure has repeatedly fallen far behind budget plans in recent years as political disputes and bureaucracy have delayed the implementation of economic development projects.

In past years, an average of only 35 per cent of budgeted allocations for capital projects were spent by December; the rise of this ratio to 39 per cent suggests the government’s ability to push through projects is improving, NBK said.

Government revenue in the first nine months of this fiscal year dropped 12 per cent to KD21.2 billion. Oil revenue, which account for over 90 per cent of state revenue, fell 13 per cent.

Last month the government released a draft budget for next fiscal year that projected a deficit of KD8.23 billion, assuming an average oil price of $45.