Kuwait economy – Fiscal surplus higher than budgeted

Event

Kuwait’s budget surplus for the first eight months of fiscal year 2012/13 (April-March) reached KD14.7bn (US$52bn), data from the Central Bank show, exceeding the KD11.6bn surplus recorded at the end of the same period of 2011/12.

Analysis

Revenue stood at KD21.6bn at end-November, far exceeding the budgeted amount of KD9.3bn. Oil revenue continues to make up almost all of the government’s income, accounting for nearly 95% of the total. Kuwait traditionally underestimates the oil price and set it at just US$65/barrel in the 2012/13 budget plan, resulting in a low revenue projection. Oil prices (Brent) averaged US$111.9/b in 2012. Non oil-revenue surpassed the budgeted amount for the period by KD367m, reaching KD1.1bn.

Expenditure fell short of the budget target for the period by KD7.2bn, reaching just KD6.9bn. Government spending was also slightly down on the same period of 2011/12 when it reached KD7.1bn. Although expenditure on wages grew by 24.7% year on year to KD1.9bn, transfers declined by 23% and capital spending fell by 20.3% to just KD577m. This compares with budgeted capital expenditure of KD2.6bn for the full year. The government’s ability to spend has been constrained by domestic political tensions. The country was without a parliament from June to December, leading to a delay in the approval of the 2012/13 budget. The government finally passed it in October.

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