Kuwait now expects to post its first deficit in two decades by 2017, Finance Minister Anas Al Saleh has reportedly told the Kuwaiti Parliament. Al Saleh said the recent decline in oil prices, which account for about 90 percent of export revenues, would see Kuwait fall into the red sooner than the International Monetary Fund (IMF)’s 2017-18 prediction, according to a local daily.
The budget is being particularly weighed down by expensive subsidies for petrol, electricity and water, which Al Saleh said had been growing by 25 percent annually. The total subsidy bill had soared from KD864 million ($2.94 billion) in the 2004-05 fiscal year to almost KD5 billion ($17 billion) during the 2013-14 fiscal year, which ended a few months before the oil price slump.
Diesel subsidies account for about half of the total. The government moved to cut diesel and kerosene subsidies for most people in Kuwait at the beginning of the year but it is facing a backlash from some MPs, consumers and businesses – which have not been allowed to increase charges and therefore have effectively taken on the gap the government previously paid.
The government also is considering reducing subsidies for petrol, electricity and water in a bid to cut its spending and minimise the expected deficit.
The price of Kuwaiti oil has fallen below $40 a barrel from an average above $103 a barrel in the year to June, 2014.