Highlighting a budget deficit of KD14 billion, Finance Minister Barak Al-Shaitan said on Wednesday, that there is insufficient liquidity for the payment of state salaries, which can be covered until November only, Al Qabas reports.
He pointed out that there is a budget deficit of KD14 billion dinars, with problems further compounded with oil revenues suffering a very low decline and an increase in deficits that arise due to the increase in expenditures over revenues. This has prompted the government to provide liquidity to address financial imbalances, he added.
“Among the matters put forward by the government to address the imbalances is to provide temporary liquidity to pay the salaries for the next two months until next November, and we still have an expected deficit of 14 billion in the 2020/2021 budget,” He underscored.
“Yes, we need to ensure stability, and the government presented its project in 2017 and in 2018, the committee approved it, and in 2020 it was returned by the government, and the public debt will save KD20 billion dinars for 30 years to distribute 40 percent for expenditures and 60 percent for infrastructure,” he added.
Stressing that the Public Debt Law is necessary to provide liquidity in light of the state facing a budget deficit, Al-Shaitan emphasized there is need to abstain from deducting from the general reserve in favor of the Future Generations Fund except in the event of a budget surplus, as it is one of the ways to address the liquidity shortage that the state suffers from as a result of a decline in oil prices and the increase in public budget expenditures.
Addressing the budget deficit, the minister said, “The budget deficit recorded from the beginning of April 2020 until the end of July amounted to KD4 billion dinars. We have KD2 billion dinars in the general reserve and a monthly withdrawal rate of KD1.7 billion dinars, and if oil prices do not improve, and we borrow and implement financial reforms the liquidity will run out.”
Al-Qabas published in the August 17, 2020 issue, that the Parliamentary Finance Committee submitted to Parliament its report on the public debt law, revealing an expected deficit of KD14 billion dinars in the 2020/2021 budget, with an increase of about KD7 billion. This was also partly due to the repercussions of the coronavirus crisis.
The report states: The Ministry of Finance clarified that borrowing is one of the means to bridge the budget deficit, not the only means, and when the government submitted the draft law, the coronavirus crisis had not occurred. However, this crisis exacerbated the problem, in terms of accelerating the depletion of the general reserve and lead to the inflation of the budget deficit. The ministry also indicated that the new draft law avoided the remarks made by the Financial and Economic Affairs Committee in the previous draft law, so that the borrowing ceiling was reduced from 25 to 20, and in another specific situation, which is the ratio of public debt to GDP, and the aspects of spending were identified by allocating KD8 billion to fill the budget deficit and KD12 billion for capital projects.
The Ministry indicated that a Cabinet Decision No. 782 had been issued to push the Ministry of Finance to approve three laws: the Law to Permit the Government to Contract Public Loans and Funding Operations from Local and International Markets and the Law on Governmental Sukuk, and to amend the Law Decree to establish a Reserve for Future Generations. The ministry emphasized that these laws represent temporary solutions that cannot be relied upon in the medium and long term, and their approval does not in any way substitute for reforms in public expenditures and reforms in public revenues, otherwise the government will face the same problem after a while. The ministry expressed its confidence in the government’s ability to borrow at the best rates. The high rating of Kuwait, the low ratio of public debt to domestic product and the ratio of public debt to state reserves are all factors that give the lender and investor high confidence in Kuwait.