Official figures issued by the Ministry of Finance revealed that the total value of letters of guarantee held by government agencies in return for contractors and suppliers implementing their contracts with various entities increased by 2.3% to reach about 6.10 billion dinars by the end of the fiscal year 2023-2024, compared to the total letters of guarantee at the end of the previous year, which were estimated at about 5.96 billion dinars, in a report published by Al Qabas.
The letter of guarantee is an irrevocable pledge issued by a bank in favor of government agencies, whereby payment is made to the government if the company fails to fulfill the obligation according to the conditions stated in the letter of guarantee.
Project activity
Related sources indicated that the increase in the value of letters of guarantee is evidence of the activity of government projects during the past period and the increase in the pace of offering projects and signing various contracts to implement the work required by the government, whether it is implementing one of the major projects or providing one of the entities with the required materials.
The figures showed that the Ministry of Electricity and Water was the main reason for the increase in letters of guarantee, as the total value of letters of guarantee issued to it amounted to about 1.83 billion dinars, representing about 30% of the total, a significant increase over its balance of letters of guarantee during the corresponding period of last year.
The sources said that the volume of government projects in the electricity and water sector has increased in pace during the recent period, in order to enable the ministry to face the major challenges it has recently faced, which were represented by the increase in electrical loads, which necessitated the signing of special contracts for maintenance, or increasing the capacity of electrical loads during the coming period.
Ministry of Works
After the Ministry of Electricity and Water, the Ministry of Public Works came in second place with the largest balance of letters of guarantee, as the total value of its letters of guarantee amounted to about 1.23 billion dinars. The sources expected that the volume of letters would increase during the coming period with the preparations being made by the ministry to launch a large number of huge projects related to road repair and maintenance and implementing infrastructure for a large number of areas.
Looking at the government agencies that have the most letters of guarantee, the Ministry of Electricity and Water and the Ministry of Public Works came in first and second place respectively, while the Ministry of Defense came in third place with letters of guarantee worth 970.3 million dinars, followed by the Ministry of Health, whose letters of guarantee amounted to about 812.4 million dinars, then the Ministry of Finance – General Accounts, with letters of guarantee worth 727.2 million dinars.
The sources expected a significant increase in letters of guarantee in favor of the government during the coming period, especially with the formation of the Board of Directors of the Central Tenders Agency more than three months ago, which has increased the pace of issuing and awarding government tenders.
Private sector
Economic forecasts indicate that Kuwait is about to embark on a package of strategic development projects that will primarily work to enhance the role of the private sector to be more active in the local economy, explaining that capital spending, also known as investment spending, aims primarily to expand production capacity and achieve economic growth.
The general budget for the fiscal year 2024-2025 was approved, which included rationalization of current expenditures, with an increase in the percentage of capital expenditures by 7.7%, compared to the draft general budget for the fiscal year 2023-2024, thus capital expenditures constituted 9.3% of the total public expenditures of the state for the fiscal year 2024-2025.
Actual capital expenditures in the general budget for the fiscal year 2023-2024 amounted to 1.8 billion dinars, representing 74% of the total allocated in the draft state general budget of 2.2 billion dinars.
New projects
The current development plan includes several new projects, including the Economic Zones Project, the Salmon and Seabass Farming Project – Phase I, the Al-Zour North Station Project (Phases II and III). This is in addition to the supply, installation, operation and maintenance of gas turbine units to increase electrical power at the Subiya site, and the expansion in establishing and developing free zones in Kuwait.
