The fiscal year of 2015/16 will close with a deficit of KD 3.9 billion (USD 12.7 billion) or 9.8 percent of GDP, National Bank of Kuwait (NBK) predicted on Friday. The interim public finance figures for the first eight months of fiscal year 2015/16 (FY15/16) point to a decline in government spending, as the price of oil fell to a seven-year low, NBK monthly reporet said. However, despite the decline in overall spending, wages and salaries and capital spending still rose. The latter continued to reflect an accelerated pace of project execution. Meanwhile, nonoil revenues remained well below their 5--year average, it added.
The government recorded a preliminary deficit of KD 1.9 billion during the period before the transfer to the Reserve Fund for Future Generations (RFFG). As of November, reported government spending stood at KD 6.6 billion fiscal-year-to-date (fytd); this figure was 22 percent lower than during the same period last year. However, at 35 percent of the FY15/16 budget, the spending rate is slightly lower than the five-year November average of 37 percent. Actual spending was even higher at KD 11.2 billion according to new data being published by the Ministry of Finance on actual withdrawals made from the government accounts at the Central Bank of Kuwait. This accounting difference is related to delays in reporting expenditures by some ministries. Also, the government has payments due of KD 1.14 billion to the Ministry of Electricity and Water (MEW) and the Public Institute for Social Security (PIFSS). Current spending, the bulk of total spending, came in at KD 5.8 billion fytd, down 25 percent y/y.
The decline in current spending was driven mainly by the "miscellaneous expenditures and transfers" chapter, which includes military salaries and transfers to PIFSS. Wages and salaries stood at KD 2.4 billion fytd, up 9 percent y/y. Miscellaneous expenditures and transfers came in at KD 3.1 billion fytd, down 28 percent year-on-year (y/y), mainly due to a significant drop in support to refined products and LNG. Goods and services (Chapter 2) stood at KD 0.4 billion fytd, down by 72 percent y/y as spending on fuel for electricity and water (MEW) declined by 88 percent y/y. Capital spending rose by 11 percent y/y to KD 0.8 billion fytd. Capital spending is currently at 34 percent of the full-year budget, compared to the five-year average of 28 percent. This reflects the government's commitment to the strategic projects of the development plan. Spending on projects, maintenance and land purchases (chapter 4) reached KD 740 million, up by 8.5 percent y/y.
The Ministry of Electricity and Water (MEW) and Ministry of Public Works recorded the highest ratios of spending to budget in Chapter 4, at 41 percent and 48 percent, respectively. Total government revenues were KD 10.4 billion in the eight months, down 45 percent y/y. Both oil and non-oil revenues witnessed significant declines, recording drops of 46 percent and 32 percent y/y, respectively. Oil revenues remain low as oil prices fell to a seven-year low and below last year's average. The Kuwait export crude (KEC) price averaged USD 50 per barrel during the first eight months of FY15/16 and USD 38.2 in November.