Kuwait's finance ministry has slashed spending and projected a big deficit in a draft budget for the next fiscal year, as plunging oil prices hit its export revenues.
The draft budget for the year starting in April envisages spending of 19.07 billion dinars ($64.6 billion), down by 4.14 billion dinars or 17.8 percent from planned spending for the current 2014/15 year, the ministry said on Monday.
It pledged to save money by cutting waste, placing caps on spending in all areas of government and reducing non-essential expenditure while continuing to allocate money to social welfare and a range of major infrastructure projects.
Meanwhile, next fiscal year's revenues are projected at 12.05 billion dinars, down from 20.07 billion dinars originally expected for the current year. A total of 1.21 billion dinars would be allocated next year to Kuwait's Future Generations Fund (FGF), part of its sovereign wealth fund.
The result would be a budget deficit of 8.23 billion dinars, which the government would cover through borrowing from its general reserves or from the local and foreign capital markets, the ministry said.
Kuwait's budget plans are only very rough guides to reality, so its projections do not necessarily mean actual state spending will fall sharply.
In recent years, political disputes and bureaucracy have frequently caused actual spending to run far behind planned spending. In the first six months of the current fiscal year, for example, actual public spending was 6.12 billion dinars, below 11.61 billion dinars originally planned for the period.
So if the government implements most of next year's budget plan, actual spending may equal or even exceed this year's actual spending, avoiding a hit to economic growth.
Nevertheless, Kuwait's 2015/16 budget draft shows the pressure on Gulf states' finances due to oil's slide, which has brought the price of Brent crude down to around $48 a barrel from around $115 as recently as last June.
The finance ministry said the draft was based on an average oil price of $45, down from $75 in the current year's budget, and assumed oil output of 2.7 million barrels per day. Kuwait would need an oil price of $77 to balance the budget, it said.
The contribution to the FGF, which invests outside Kuwait, would be cut back to 10 percent of revenues next fiscal year from 25 percent at present, the document said.