Kuwait underspends budget (page 2 of 2)

Meanwhile, revenues from income taxes on foreign companies went down by 7.5%.

Customs fees increased by almost 26% over last year, reaching about KD 57.6 million. The increase accompanied the growth of imports by 24% during the first 9 months of 2003. Property fees rose by 14%, while registration fees decreased by 26% in line with budget projections.

NBK says that total expenditures dropped by 4.7% compared with last year, despite a 7% projected increase in government spending. Actual spending stood at 37% of the budget prorated for the period. The drop came mainly from lower reported transfers and military procurement that do not have a direct impact on domestic demand or economic activity.

Excluding such items, spending remained level with last year. Furthermore, large closing adjustments are normally awaited on a number of expenditure accounts after the end of the fiscal year. Therefore, while the level of spending may not present a complete picture, the pattern of change relative to the same period last year reveals how government plans are being implemented.

Overall, employment-related spending, which tends to cover two-thirds of total expenditures, decreased by 1.7% over last year, mostly due to a slowdown in the growth of wages and salaries and a reduction in transfers to the Public Institute for Social Security (PIFSS).

Neither is indicative of a trend, however, as reporting delays are quite common in interim reports. According to the NBK report, indeed, wages and salaries of ministries and attached bodies grew by only 2.8% over the first 6 months, compared with a 9.4% increase during the same period last year.

A 6.5% increase was recorded by the Ministry of Education, which is the leading employer, whereas no growth was reported by the Ministry of Interior. However, the Ministry of Public Health, which is the third largest public employer, measured an 8.6% drop in wages and salaries, compared with a noticeable 118% rise last year.

Transfers and miscellaneous expenditures, which constitute over half of total government spending, decreased by 8% relative to last year. The main factor was a 10% drop in transfers to public institutions, primarily to the PIFSS. Transfers abroad were also slashed by 62%, while households received a small increase. Transfers under the National Labor Support Program increased considerably, yet at a much slower rate than last year.

Miscellaneous expenditures, of which a good part is related to the Ministry of Defense, also went down by 5.6% but could be revised upwards in the closing accounts. Under this category, spending on military procurement dropped by 23%, while being allocated a budget increase of 55% for this fiscal year.

Military salaries, which equally belong to this chapter, also fell by 2.7%, in contrast with a 13% increase in budget allocation. Not shown in the figures are expenditures under the KD 500 million emergency appropriation for the war on Iraq, which was approved in the last fiscal year. Official announcements indicate that more than KD 300 million have been spent to date. It is not clear, nonetheless, whether such spending is meant to substitute for on-budget items.

NBK's report states that spending on projects and maintenance slowed down compared with last year's growth rate, though remaining at about 24% of their budget allocation for the period. Expenditures on electricity and water projects went down, coming in second place after public works. Exceptionally however, smaller spending on telephone and telegraph more than doubled, though covering only 20% of their budget provision.

Spending on goods and services declined by a noticeable 22%. Fuel costs incurred by the Ministry of Electricity and Water are the largest expenditure item under this category. Knowing the upward trend in consumption and oil prices, the decrease in spending must be due to reporting delays. Once more, fuel cost settlements are expected to show in the closing accounts.