Kuwait's budget surplus (page 1 of 2)

Provisional figures for the closing accounts of the state budget for the year 2002/03 revealed a surplus of KD1.29bn. The approved budget for 2002/03 had a forecasted deficit of KD1.91bn.

The provisional results show Kuwait having achieved an actual revenue of KD6.2bn, while the budgeted revenue was placed at KD3.5bn, which represents a KD2.7bn or a 76.6% increase.

Like the previous years, the reason behind the budget surplus has been the higher oil prices as well as the under spending of the total allocated expenditure. Oil revenues amounted to KD5.5bn, an increase of 85.2% over the budgeted figure.

Oil revenues also represented 88.4% of the government's total revenue, as compared to 84.8% of the budgeted amount as well as the actual results for fiscal year 2001/02. This reflects the government's increased dependency on oil revenue as its major source of income.

The other revenue receipts also improved by 30.5% to KD720.5mn compared to the budgeted amount of KD552.2mn, but compared to the 2001/02 actual figures, it declined by 11.2% (KD811.6mn). Tax revenues increased by 23.4% as the government collected KD136.5mn in taxes during fiscal year 2002/03 as compared to KD110.6mn in 2001/02.

Tax revenues from all segments increased during the year; tax on net income and profits (KD8.5mn or a 47.5% increase), tax on duties and property (KD2.2mn or a 38.6% increase), entry and registration fees (KD0.5mn or a 45.5% increase) and taxes on international trade and transactions (KD14.8mn or a 17.2% increase).

The segment which reduced total receipts was other revenues achieved by the government which declined to KD211.5 as compared to KD371.4mn in 2001/02, a decline of 43%.

The results also illustrate an under spending of KD500.6mn (9.2%) the total allocated funds of KD5.4bn, which resulted in an actual expenditure of KD4.9bn. This has been a recurring phenomenon in Kuwait's yearly budget allocations.

Actual expenditure did increase though over 2001/02 by 3.8%. Although the budget for 2002/03 had set all the segments to increase, spending on transport & equipment, or capital expenditures, actually declined marginally by 1.7% to total KD23.7mn in 2002/03 as compared to KD24.1mn in 2001/02.

A look at the economic classification of expenditures shows construction spending declining during the period as did land acquisitions. Other expenditures was the main cause behind the increase in total expenditures which increased by 10.7% to KD1,014.2mn in 2002/03 as compared to KD916.2mn in 2001/02. Current expenditure, or government consumption, also increased slightly with the government spending KD28.3mn or nearly 1% more in 2002/03.

With the second quarter of the fiscal year 2003/04 ending on September 30, 2003, it is evident that the state budget will presumably return a surplus again for the fiscal year at hand. The absence of a steady supply of Iraqi oil has helped maintain high oil prices. The budget for the fiscal year 2003/04 is projected to have a shortfall of KD2.3bn.

However, the underlying assumptions used are known to be incredibly conservative, citing a value of US$15/b for Kuwaiti oil and excluding income from overseas investments. Further, we hold the historical belief that the government usually spends 8-10% less than it allocates, an issue that has been debated numerous times in the National Assembly.

Provisional quarterly figures from the CBK show the government to have raked in KD3.09bn in oil revenue for the six month period ending September 30.