Kuwait’s budget deficit increased 174.8% in the 2020-21 year to 10.8 billion dinars ($35.5 billion), the finance ministry said recently, noting it was the highest deficit in the country’s fiscal history.
Revenue dropped to 10.5 bn dinars ($34.90 bn) in the financial year that ended on March 31, down 38.9%, while expenditure increased 0.7% to 21.3 bn dinars ($70.78 bn), the ministry said in a statement.
Kuwait’s parliament in June approved the 2021-22 state budget proposed by the government in January, which projected 23.05 bn dinars ($76.6 bn) in expenditure and a deficit of 12.1 bn dinars ($40.21 bn).
The parliamentary vote came amid a stand-off between government and parliament that has delayed reforms in the OPEC member state.
Oil revenue slumped 42.8% in 2020-21 to 8.8 billion dinars ($29.24 bn), the ministry said. Wages and subsidies accounted for 73% of total expenditure, while capital and infrastructure expenditure accounted for 9%.
The average Kuwaiti crude selling price for the fiscal year reached $42.36 per barrel, with average oil production of 2.5 million barrels per day, the ministry said.
“The deficit is attributed to the sharp decline in oil prices and minimal government operations as a result of the COVID-19 pandemic,” Finance Minister, Khalifa Hamada, said in the statement.
“The cabinet is prepared to discuss the closing accounts with the parliament and to move forward in implementing real, effective, and sustainable solutions to the challenges facing public finances.”
The State’s closing accounts must be ratified by parliament in order to be considered final.
Earlier this year, Hamada said an increase in oil revenue due to higher oil prices does not cover the Gulf state’s budget obligations and Kuwait would need oil prices of $90 per barrel to balance the budget.
Brent crude oil futures are averaging $70.
New KIA board
Kuwait’s emir recently issued a decree appointing the Kuwait Investment Authority’s (KIA) board of directors for four years, the state news agency (KUNA) reported.
The move was approved by Kuwait’s cabinet, the newspaper al-Qabas said.
The $700 bn sovereign wealth fund’s previous board tenure expired in April and sources have previously said the delay in appointing new board members was the result of political deadlock.
Speaker Marzouq al-Ghanim had called the special session to debate the budget at a time when the OPEC nation is trying to boost state finances and support an economy that shrank 9.9% in 2020 due to low oil prices and the coronavirus pandemic.
KIA manages the Future Generations Fund, which has risen to about $700 billion after gaining a record 33% during the last fiscal year ending March 31. That fund was initially designed to reduce the KIA’s dependence on oil-related investments.
The newly appointed board members are:
- Faisal Al-Hamad, CEO of Global Wealth Management at National Bank of Kuwait
- Khaled Al-Fadhel, the country’s former oil minister
- Sheikh Meshaal Jaber Al-Sabah, director-general of Kuwait Direct Investment Promotion Authority
- Fahad Al-Rashed, who was the first KIA managing director from 1985
- Ghanim Al-Ghunaiman, an official with the Kuwait Fund for Arab Economic Development
The board always includes the finance and oil ministers, as well as the central bank governor and finance ministry undersecretary. The remaining non-government members are representative of the private sector.
The KIA is the world’s oldest sovereign fund with stakes in ports, airports and power distribution systems around the world.