For years, Kuwait’s high level of public spending combined with its relative lack of liquid assets has led to warnings of a looming liquidity crunch. But the Covid-19 pandemic and collapse in oil prices in 2020 drained reserves more rapidly than anyone anticipated and transformed Kuwait’s perennial stand-off between government and parliament over public spending into a fiscal crisis.
In June 2021, the 2021/22 budget, which included substantial funding for strategic projects, was finally approved. It also anticipated a deficit of $36bn. Cutting spending is the only way to quickly reduce the deficit. But cuts to the public wage bill are politically unpalatable. At the same time, long-term growth needs strategic investment.
Post-Covid-19, Kuwait’s priority is to accelerate its Vision 2035 diversification and structural economic reform programme aimed at bringing private investment and new job-creating industries into the country. The recovery in oil prices in the second half of 2021 significantly eased the pressure on Kuwait’s finances and provided renewed optimism about the outlook for project spending.
With about $200bn of projects planned or under way, there is no shortage of potential opportunities in Kuwait. The challenge is delivery. Very little of what is planned is being brought to tender or contract award. With the exception of 2020, the country’s projects market has declined every year since 2015.
Project spending in Kuwait’s oil industry slumped in 2019 and 2020 due to Covid-19 and low oil prices. But a restructuring of the sector in 2021 coincided with some major contracts for oil and gas projects, providing hope for new spending.
Most of Kuwait’s planned projects include urgently needed infrastructure developments
Outside the oil and gas sector, Kuwait Authority for Partnership Projects wants to progress its programme of privately financed public-private partnership (PPP) projects. Kuwait’s banks appreciate the need for greater participation by local institutions in PPP projects, and see the positives in committing to long-term local project finance. But Kuwait needs decisive government action and far swifter implementation to achieve its objectives.
Most of Kuwait’s planned projects include urgently needed infrastructure developments, following more than a decade of underspending. For Kuwait’s Vision 2035 investment strategy to succeed, roadblocks must be bypassed.
For more information and sample pages from MEED Insight's Kuwait Projects 2022 report, please click here
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.