Kuwait will most likely post a budget deficit before 2017 due to the falling oil prices, the country’s finance minister Anas-al-Saleh told the parliament.
Al Saleh said that plummeting oil prices will slash Kuwait’s public revenues by 60 per cent, leading to a deficit after almost 16 years, Kuwait Times reported.
The Gulf country is highly dependent on oil as a means of income, with 95 per cent of its public revenues being derived from it.
However, lower oil prices have been affecting the government’s ability to indulge in welfare spending as freely as before when oil ranged above $100 a barrel.
According to Saleh, Kuwait spent up to KD5 billion in subsidies during the last fiscal year, up 25 per cent from KD864 million spent in the fiscal year of 2004.
In order to reduce the strain on its coffers, Kuwait slashed its subsidies on diesel, kerosene and aviation fuel from January 1. It is considering a phase-out of subsidies on petrol and other utilities but no concrete steps have been taken in that direction yet.
The reduction in subsidies has also led to production costs soaring among businesses, triggering a wave of price hikes, local media reported.
As a result, the parliament has urged the government to halt the removal of any more subsidies or grants over fears of further price rises in the economy.
Lawmakers also called on the government to conduct a comprehensive study to ensure that the subsidy removal will not affect citizens’ living standards.
Despite such steps towards austerity, Kuwait is not expected to go into a spending freeze over the next year.
The OPEC-member recently announced that it has set apart KD45.5 billion ($155 billion) in the country’s five year developmental plan to spend on various projects and on human resource development.
The amount is expected to finance 523 projects from 2015 to 2020, Kuwaiti MP Mohammed Al Jabri was quoted as saying.
Out of the total amount, Jabri said that KD29.5 billion will be spent on economic development and KD15.5 billion on human resource development. The remaining amount of KD500 million will be spent on administrative development.