Kuwait fiscal deficit narrows as higher oil prices boost revenues

Kuwait fiscal deficit narrows as higher oil prices boost revenues

KUWAIT: Kuwait’s budget deficit for the seven months of FY21/22 was lower than expected at KD 1.2 billion. The reduction in the deficit came on the back of higher oil revenues thanks to the surge in oil prices. With oil prices at higher than previously anticipated levels and government spending relatively restrained, the full-year deficit could shrink to below our earlier forecast of 10.5 percent of GDP. However, reforms to diversify the economy and improve the sustainability of the public finances should remain a priority.

The government registered a cumulative fiscal deficit of KD 1.2 billion by the end of the first seven months of FY21/22 (April to October), an improvement on the KD 3.8 billion recorded by the end of the corresponding period in FY20/21, according to preliminary Ministry of Finance data. Total revenues increased by a huge 80 percent y/y on higher oil revenues, already achieving 88 percent of full-year budget estimates. This was primarily due to higher oil prices, with the price of Kuwait Export Crude (KEC) rising 104 percent y/y to an average of $72.3/bbl during this period. Crude oil output increased only marginally (+2.8 percent y/y, to an average of 2.41 mb/d).

Non-oil revenues increased by 47