Parliament passed new budget on 1 July
- Kuwaiti government projects budget deficit of more than $23bn for the fiscal year 2015-2016
- Deficit is predicted as a result of slump in oil prices
- In 2014-2015, Kuwait recorded first budget deficit since turn of the century
Kuwait has forecast that it will record its first budget deficit in 16 years, with a KD7bn ($23.2bn) shortfall predicted for the fiscal year 2015/16 as a result of the drop in oil prices.
On 1 July, parliament passed the 2015/16 state budget, which forecasts that revenues will reach $40.7bn, a 39 per cent drop on last years forecast. Spending for the year is projected at $63.9bn, more than 17 per cent lower than last years estimate.
In the fiscal year 2014/15, Kuwait recorded its first budget deficit of the new century, with the previous deficit having occurred in the 1999/2000 fiscal year. The KD7.6bn budget deficit in the 2014/15 year was recorded following contributions to the Future Generations Fund, which is part of the countrys sovereign wealth fund, the countrys Finance Minister Anas al-Saleh told parliament at the passing of the new budget.
Forty-seven MPs voted for the budget, with only four opposing the expenditure plan. Approval of the budget was delayed, with Kuwaits budget year running from April to March.
At the parliamentary session to pass the budget on 1 July, Al-Saleh said the sharp drop in oil prices was having a significant impact on the countrys economy, with Kuwaits hydrocarbons sector accounting for more than 90 per cent of state revenues.
We are facing a very difficult financial situation, Al-Saleh told parliament. We must control the growth in spending and diversify our sources of income so as not to remain completely reliant on oil.
The projected budget deficit for the current fiscal year assumes an average oil price of $45 a barrel, so if the oil price remains higher then the deficit would be lower, Al-Saleh said.
Kuwaits budget surplus for the past 15 fiscal years has been due to a combination of high oil prices and an inability to push ahead with key development schemes due to inefficient bureaucratic processes and schisms between government and the elected parliament.
Kuwaits inability to meet spending targets has resulted in the country saving up substantial financial reserves, with unofficial estimates placing the value of the countrys sovereign wealth at about $550bn.
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