There has been negative effects from the drop in oil prices on the public budget, including a financial deficit estimated at about one billion dinars per month, however, several budget items have benefited through measures dealing with this decline, Al Qabas reported. As the budget was reworked to deal with the economic circumstances, this allowed Kuwait to save about KD291 million with regards to subsidies in the last seven months of the current fiscal year, economic sources said to the daily.
The sources pointed out that the cost of fuel subsidies in the general budget has decreased by about 27% since the beginning of the fiscal year, with KD290 million being saved between April to October, pointing out that the decline in world oil prices has also contributed significantly to the reduction in the cost of fuel subsidies in the budget.
In addition to energy and fuel subsidies for the operation of power and water plants, the government provides energy and fuel subsidies to its consumers, which account for about 40% of the total value of subsidies provided to citizens through the budget. It is expected the value of subsidies will reach about KD1.5 billion out of the total KD3.5 billion allocated in the current budget for subsidies.
The subsidy section in the budget has witnessed a remarkable development in the past five years, as it decreased by 31%, which is mainly due to the decline in global oil prices, as the numbers showed a decrease in the subsidies from KD 5.1 billion dinars in the 2014/2015 fiscal year to KD3.5 billion in the new fiscal year 2020/2021.
Budget cuts
In September, Reuters reported that Kuwait has cut KD945 million dinars in expenditure from its budget for the 2020/2021 fiscal year, the head of a parliamentary committee, and mentioned workers’ rights, benefits and subsidies would not be affected.
The country is seeking to save money while facing a deficit of 14 billion dinars this fiscal year, which began on April 1, amid the twin shock of the oil price crash and coronavirus pandemic.
To bolster its finances, the government is trying to pass a debt law that would raise Kuwait’s debt ceiling and allow it to tap international investors. “As a result of the current crisis, the ministry of finance has amended the estimates for the 2020/2021 budget, with revenues estimated at 7.5 billion dinars and expenditures at 21.5 billion dinars,” The head of the budgets and final accounts committee, Adnan Abdulsamad said to parliament’s Twitter account.
In January, Kuwait expected spending of KD22.5 billion and revenues of KD14.8 billion dinars in the 2020/2021 budget.
Abdulsamad said surpluses between 1999 and 2019 totalled KD50 billion and were transferred to the General Reserve Fund, one of Kuwait’s sovereign funds.
In June, Kuwait said it would cut state entities’ budgets by at least 20%.
“Lawmakers reaffirmed, during a discussion on budgets, the need to reconsider support for (government) bodies, abolish the futile ones, and restructure state institutions in order to limit the state’s general budget deficit,” the National Assembly said via Twitter.