Kuwaiti oil revenues rocket (page 1 of 2)

The results for the period from April 2003 through January 2004 reveal a significant rise in oil revenues following a comparable one last year, in addition to a remarkable increase in non-oil revenues.

Expenditures growth more than doubled over the previous period. Still, significant upward adjustments are normally expected in expenditures after the close of the fiscal year. The bottom line will therefore be a smaller, yet sizeable surplus.

The actual interim figures for the period contrast sharply with budget projections of a KD 1.99 billion deficit before RFFG, primarily due to the government's extra-conservative assumption on oil prices and oil production levels in addition to continued growth in planned expenditures.

NBK's report states that total revenues rose by 14% from a year ago to reach KD 5.72 billion, almost double budget projections for the period. Both oil and non-oil revenues contributed to the increase. Oil revenues rose by 13% to stand at KD 5.09 billion.

Most of the growth came from increased oil production rather than oil prices, as the $26.4 average price of Kuwait export crude (KEC) during the first ten months of FY03/04 was 6% higher than a year ago, while production increased by a more substantial 15%.

Non-oil revenues rose by 20% to reach KD 637 million, exceeding budget projections by 31%. The three main components and contributors to the increment were increases of 28% in transportation and communication service charges, 36% in customs fees, and 23% in miscellaneous revenues and fees.

The latter was primarily from UN compensations for losses due to the Iraqi invasion. UNCC payments totaled KD 127 million during the period.
Non-oil revenues undoubtedly benefited from improved economic activities following the end of the war in Iraq.

Kuwait has served as a service and trade hub for the Iraqi market and for foreign companies doing business there. This raised the demand for local services including communications. Likewise, imports advanced sharply, propelled in part by local companies winning logistics and supply contracts related to Iraq, boosting customs duties.

Meanwhile, some service revenues declined compared with the previous period. Revenues from water and electricity, which constitute 20% of service charges, were projected to increase by 7% but they actually declined by 2% following a 24% increase last year.

Revenues from healthcare continued last year's decline, realizing only 35% of the amount projected in the budget. Nevertheless, sizeable upward adjustments are normally introduced on these charges after the closing of the fiscal year.

According to NBK's Economic Brief, income and profit taxes also rose by 26% owing to the recently introduced National Labor Tax, from which revenues jumped by 157% to reach KD 12 million. Meanwhile, revenues from income taxes on foreign companies declined by 13% following a 30% increase last year.

Property registration or transfer of title fees rose by 24% compared with the previous period. They reached KD 8 million and exceeded the budget by 83%. This reflects strong activity in the real estate market. On the other hand, visa registration fees decreased by 19%.

Total expenditures rose by 4% over last year, reaching KD 3.48 billion. The increase of KD 135 million was more than double that for the previous period, yet actual spending stood at 70% of the prorated budget, below last year's 74% coverage.

Slippage was in all chapters except for Chapter 4, spending on development and maintenance projects.