Kuwait is on the verge of approving a $125bn development plan, in a move that could dramatically improve the country’s economy, according to a senior government source.

The Kuwaiti National Assembly (parliament) passed a preliminary draft of the five-year plan in the first week of January, and the government is now in talks with members of parliament (MPs) over the details of a final bill, says a high-ranking cabinet official.

If the bill is passed, it will be the first time a Kuwaiti government has officially inaugurated a long-term spending plan since 1986. However, the plan passed in July 1986 did not survive the dissolution of parliament three months later.

A vote on the definitive version of the new bill was originally set for 28 January, but that has been pushed back until the first or second week of February as the government tries to build consensus. The government is confident that parliamentarians will vote for the bill, says the source.

“It is going to get through,” he says. “As long as there is no dissolution of parliament in the near future, this will be the first time Kuwait has ever ratified a long-term plan for the country’s economy.”

Local bank Global Investment House believes total spending up to 2014 could total $125bn under the plan.

The bill includes work on a series of government megaprojects, including the construction of the $77bn City of Silk on the Subiya peninsula, according to Walid Samir, an analyst at the bank. Other schemes include a $3.5bn-plus causeway and a new metro and railway system.

It also calls for KD25bn ($87bn) of spending in the energy sector, the country’s biggest single revenue generator. This programme includes a $15bn new refinery at Al-Zour, an $18bn clean fuels programme to upgrade the country’s existing refineries, and developing new oil and gas fields in the north and west of Kuwait.

If the plan is passed, it will boost Kuwait’s economy, says Samir. Although the country has passed successive multi-billion-dollar budget surpluses in recent years, its economy relies on oil revenues, which will make up 93 per cent of government income in the year to 31 March 2010, according to the National Bank of Kuwait.

Disagreements between the government and National Assembly members since 2006 means little progress has been made on major projects or public sector reforms in Kuwait. Contracts awarded on the Al-Zour refinery were cancelled in March 2009 after the country’s Supreme Petroleum Council came under political pressure to stop the project.

“We really hope [the bill] will happen,” says Samir. “It was a historic moment when the first draft was passed. Everyone is looking forward to the good impact it is going to have on business in Kuwait.”