The Economist Intelligence Unit says the limited amendments to the draft general budget for Kuwait 2022/2023, which was recently approved by the Budgets and Final Account Committee in the National Assembly, confirm that the surplus resulting from the rise in oil prices facilitates further postponement of reforms that face additional obstacles in the near term, as a result of the state of political paralysis in the country.
The Unit explained that oil constitutes 90 percent of government revenues in light of the continuous failure to implement budget reforms and expand the revenue base, which makes income highly dependent on fluctuations in international oil prices, indicating that the revised budget notes a sharp rise in oil prices since the publication of the previous draft budget last January, by raising the assumed price per barrel from 65 to 80 dollars, which will increase the assumed revenues by 25 percent to reach 23.4 billion dinars ($76.3 billion) which will generate a modest surplus of 300 million dinars.
The unit pointed out that the world’s high commodity prices occupy a modest position in the expenditure item, noting that the budget allocated an increase of about 5% over the previous estimate due to certain factors, the most important of which is the increase in support for agricultural products. However, the unit expects the average oil prices during the year ending on March 310 2023 will exceed $100 per barrel, bringing the surplus to 6.9 billion dinars, or 11.9 percent of the gross domestic product.
The unit indicated that the most prominent element in the draft budget is the relative stagnation compared to previous years, as public sector salaries absorb 55 percent of expenditures, while subsidies absorb 19 percent, indicating that this reflects the failure of the government — even in the wake of the severe budget crisis that resulted from oil price crash 2020 — in taking austerity measures to improve the long-term sustainability of the budget.