Kuwait projects $30bn budget deficit on Opec cuts

Kuwait faces a widening budget deficit for the coming fiscal year, because of lower oil prices and reduced output caused by its participation in the Opec and non-Opec production agreement.

Kuwait's ministry of finance submitted to parliament yesterday its proposed budget bill, which projects a deficit of 9.2bn Kuwaiti dinar ($30.25bn) for the year that starts on 1 April. This would be a seventh consecutive year that Kuwait has posted a deficit, and is 12pc larger than the KD8.2bn projected for the current year.

The bill projects lower state revenues, particularly from the oil and gas sector. Overall, the ministry forecasts revenues at KD14.8bn, down by 9.7pc on the current year, and state expenditure at KD22.5bn, level with the current year. The deficit forecast takes into consideration a mandatory 10pc allocation of total revenues to Kuwait's future generations fund, which is managed by the sovereign wealth fund KIA.

Taking this allocation into account, the ministry put a break-even crude price for its proposed budget at $86/bl. Kuwait's newly appointed finance minister Mariam Aqeel al-Aqeel said the deficit will be completely covered by state reserves.

It expects oil and gas revenues of KD12.9bn, or 87pc of the total, down from KD14.5bn or 88pc this year. The ministry includes in this figure revenues from the sale of crude and gas, and the tax and concession fees paid by oil companies operating in Kuwait.

Al-Aqeel put the widening budget deficit down to a combination of the lower oil-price environment and Kuwait's commitments under the Opec and non-Opec agreement. Kuwait said it will cap its output at 2.67mn b/d at least until the end of the first quarter. It has nearly 3mn b/d of production capacity.

Opec and its non-Opec allies will meet in the first week of March to discuss what action, if any, will be required beyond the current agreement's expiry.

Kuwait has based its budget calculations for the coming year on a crude price of $55/bl, level with the current year's budget, and average production of 2.7mn b/d. Argus estimated Kuwait's crude output at 2.71mn b/d in December.

There is no timeframe for parliament's ratification of the budget.

By Nader Itayim