The government of Kuwaiti expects the budget deficit for the fiscal year 2022-2023 to decrease by 74.2 percent, which it announced on January 24, based on the assumption that oil prices will be 44.4 percent higher than they were in the previous fiscal year.
According to the Economist Intelligence Unit (EIU), fundamentally speaking the structure of the draft budget is not different from previous budgets, which confirms its expectations that the financial recovery in the years 2022-2026 will be governed by fluctuations in international oil prices.
The sources noted that politicians of all stripes recognize the urgent need for fiscal reforms in the country, which was evident in the 2020-2021 budgets when the collapse of oil prices led to a record fiscal deficit of about 30 percent of GDP.
The permanent differences, according to the sources, between the government and the National Assembly will continue to rule out any serious change, and noted that the bloated public sector salaries will absorb more than half of the total spending (58.4%), which reflects the failure of successive governments to reform the labor market so that young citizens are directed to work in the private sector.
And she added, “In the absence of reforms similar to those that have been implemented in other countries in the Gulf Cooperation Council since the late last decade, government price support absorbs 16.1 percent of spending, and at the same time, only 13.2 percent of the total budget is allocated to capital spending (down 16.4 percent). percent over the previous budget), which means continuing slow progress in development projects that have been planned for a long time and in urgent projects to modernize infrastructure.
The Economist explained that the revenue components also highlight the stagnation of the policy-making process, as the budget shows that about 90 percent of these revenues will come from oil (a high rate even by regional standards), and the expected jump in the total income of 72.2 percent is based on a rise By $20 per barrel over its hypothetical price of $65, in addition to raising production to 2.7 million barrels per day while easing OPEC’s production cuts.
This prompts the magazine to expect that the fiscal deficit will be lower given that oil prices were over the past six months above the level of $70 a barrel, and data for the past nine months until the end of December show that income was 119 percent higher than the income approved by the 2021/2022 budget and that this reduced the deficit to 682.4 million dinars, compared to an expected deficit of 12.1 billion dinars for the whole year.
The Economist Intelligence indicated that the draft budget is consistent with its expectations that the fiscal deficit will shrink from the expected rate in 2021-2022 estimated at 6.5 percent of GDP to about 1.3 percent of it in the 2022-2023 budget on the basis of an average price of Brent oil mix which is $71 a barrel.
However, the magazine expected the deficit to widen again, to constitute an average of 2.9 percent of the gross domestic product in the budgets of 2023/2024; 2026/2027 as a result of the decline in oil prices and the absence of financial reforms.