Kuwait is expected to post a budget gap of KD7.9bn ($25.9bn) for fiscal year 2017-18, which starts1 April, according to finance minister Anas al-Saleh.

The deficit compares with KD9.7bn for 2016-17 budget and includes a 10 per cent contribution to Future Generations Fund, a part of the of Kuwait’s sovereign wealth fund. Kuwait’s finance ministry has conservatively assumed an average oil price of 45 a barrel for the fiscal, Al-Saleh said while announcing the budget details.

The baseline crude price for next year compares with $35 a-barrel used in 2016-17 budget and Kuwait expects the crude to rise to $55 or $60 this year. After Opec agreed to cut production from 1 January, prices are hovering around the $55 a-barrel mark.

Kuwait expects spending during the next fiscal to reach KD19.9bn and funds allocated to FGF to reach KD1.3bn in 2017-18, up from KD1bn. Kuwaiti budget has allocated KD10.8bn for wages and KD3.1bn for overall subsidies.

The revenues next year are expected to reach KD13.3bn, up from KD10.2bn during 2016-17 fiscal. Proceeds from oil is estimated to be 36 per cent higher at KD11.7bn in 2017-18. Revenues from crude sale generated KD12.1bn in the previous fiscal.

Vision 2035

Capital spending next year is projected at KD3.4bn as the government plans to boost investment in petrochemicals and refining sectors to create more jobs

The government, which has run a budget surplus for years on the back of higher oil prices, has also announced its plans to transform its economy by 2035. The move is modelled after Saudi Arabia’s Vision 2030, which outlines a framework for radical transformation of the kingdom’s economy away from oil and generating new alternative revenues.

Listing of a power and water company this year, is part of plan to overhaul the country’s economy. Kuwait sell a 50 per cent stake of the company, established with the private sector in November, to Kuwaiti citizens.

It also plans to create three more power companies and get about 15 per cent of Kuwait’s electricity needs from renewables by 2030.