Kuwait posts budget deficit of KWD1.6bn in FY 2023/24

Image credit: YASSER AL-ZAYYAT/ Getty Images

Kuwait posted a budget deficit of $5.2bn (KWD12.4bn) in FY2023/24, a 17.9 per cent decrease compared to the previous year, the finance ministry said on Wednesday, citing lower oil revenues amid production cuts.

The Gulf state has had to comply with production cuts by the OPEC+, which groups OPEC and allies such as Russia, amid lower oil prices this year, while making slow progress on diversifying revenue sources compared with its neighbours.

Oil revenues dropped by 19.4 per cent to KWD21.5bn in FY 2023/24, based on an oil price of $86.36 a barrel, compared to KWD26.7bn a year earlier.

Similarly, Kuwait’s non-oil revenues dropped by 1.3 per cent to reach KWD2.1bn.

Expenditures on salaries and subsidies reached KWD25.2bn, accounting for 81 per cent of the aggregate expenditure, compared to KWD22.4bn in the previous year.

Kuwait’s fiscal year ends on March 31. Earlier this year, the Gulf state approved its state budget for 2024/25, which forecasts a deficit of $19.1bn (KWD5.89bn) for the fiscal year that starts April 1, 2024, and ends March 31, 2025.

Kuwait’s budget forecast

The budget projects revenue of KWD18.66bn, down 4.1 per cent from the current year’s estimate, while non-oil revenue is forecast to rise by 5.7 per cent to KWD2.42bn.

Kuwait forecasted a 6.6 per cent plunge in expenditure for the fiscal year 2024/25 to KWD24.6bn, and “salaries and subsidies will make up 79.4 per cent of the total expenditure”.

Furthermore, the Gulf state said it will allocate 9.3 per cent of the total expenditure towards capital expenditure while other expenses will make up 11.3 per cent.

The International Monetary Fund said that OPEC+ production quota cuts have disrupted the country’s economic recovery from the pandemic’s impact.

“Real economic activity is estimated to have fallen by 2.2 per cent in 2023, with the oil sector contracting by 4.3 per cent due to an OPEC+ production quota cut in May, and the non-oil sector expanding by only 0.8 per cent amid subdued domestic demand growth,” the fund said in May.

Kuwait’s economy is projected to contract by a further 1.4 per cent in 2024, with oil production falling by another 4.3 per cent due to the OPEC+ quota cut in January.

Read: Kuwait approves 2024/25 budget, forecasts $19.1bn deficit