Kuwait projects $40bn deficit as infighting delays reform

Kuwait projects $40bn deficit as infighting delays reform

Kuwait forecast its eighth consecutive budget deficit for the year starting April 1, unveiling a fiscal plan that sees a near-seven percent rise in spending as political bickering delays reforms and stymies borrowing.

The shortfall is projected at KD12.1 billion ($40bn), 13.8 percent below the current year's estimate of KD14bn ($46.2bn), according to the finance ministry. Kuwait won't be transferring 10 percent of total revenue to the Future Generations Fund, or wealth fund, in line with a law passed by parliament last year to halt such transfers in years of deficit. The move was part of a series of urgent measures aimed at preserving liquidity in the General Reserve, or treasury, which is being rapidly depleted due to a drop in the price of crude, the main source of income for the Gulf Arab state.

The budget “is not immune to the global challenges brought on by the Covid-19 pandemic and lower oil prices”, Finance Minister Khalifa Hamada said in a statement Monday. “We are in a transitional phase that requires concerted efforts for economic recovery and growth.” Budgeted capital expenditure is up 20 percent on the current year's estimate, he said.

The minister didn't say how the budget gap will be financed.