The rise in the price of oil will help to keep Kuwait in the black and balance its budget, but the healthy economic situation means there is little motivation to push through much-needed reforms and long-term diversification of the country’s public finances, according to a report released on Wednesday.
The Kuwaiti cabinet released its latest budget this week for the 2018-19 financial year, beginning in April. It outlined plans to spend 20 billion Kuwait dinars ($66.7315 billion) during the next year, up slightly from the current year. The Fitch Ratings agency has forecast that Kuwait will report a fiscal surplus of 1.9 percent of gross domestic product (GDP) for the current year, up from 0.2 percent last year.
On Thursday U.S. crude futures gained 0.1 percent to $64.79 per barrel. The budget for its current year was based on an average oil price of $45 a barrel, but as Kuwait has the lowest fiscal breakeven oil price of $50, the rising oil price means good news for the Gulf state.
However, this means there is no incentive on the Kuwait government to push ahead with its economic reforms and introduce new revenue streams such as value-added tax.
“Kuwait's exceptionally strong balance sheet position, which reduces pressure to take action, and parliamentary opposition have led to slower fiscal reform than elsewhere in the GCC [Gulf Cooperation Council],” Fitch Ratings said in a press release on Wednesday.
“Parliamentary questioning and no-confidence motions against ministers are common and led to the government's resignation in October 2017. We do not think the cabinet reshuffle that followed will accelerate reform, and do not expect VAT or excise tax to be implemented this year,” it added.
Further reading:
(Writing by Shane McGinley; Editing by MIchael Fahy)
(shane.mcginley@thomsonreuters.com)
Our Standards: The Thomson Reuters Trust Principles
Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.
© ZAWYA 2018
The Kuwaiti cabinet released its latest budget this week for the 2018-19 financial year, beginning in April. It outlined plans to spend 20 billion Kuwait dinars ($66.7315 billion) during the next year, up slightly from the current year. The Fitch Ratings agency has forecast that Kuwait will report a fiscal surplus of 1.9 percent of gross domestic product (GDP) for the current year, up from 0.2 percent last year.
On Thursday U.S. crude futures gained 0.1 percent to $64.79 per barrel. The budget for its current year was based on an average oil price of $45 a barrel, but as Kuwait has the lowest fiscal breakeven oil price of $50, the rising oil price means good news for the Gulf state.
However, this means there is no incentive on the Kuwait government to push ahead with its economic reforms and introduce new revenue streams such as value-added tax.
“Kuwait's exceptionally strong balance sheet position, which reduces pressure to take action, and parliamentary opposition have led to slower fiscal reform than elsewhere in the GCC [Gulf Cooperation Council],” Fitch Ratings said in a press release on Wednesday.
“Parliamentary questioning and no-confidence motions against ministers are common and led to the government's resignation in October 2017. We do not think the cabinet reshuffle that followed will accelerate reform, and do not expect VAT or excise tax to be implemented this year,” it added.
Further reading:
- Kuwait: Year in review
- Kuwait's growth improving on projects
- IMF reports inflation in Kuwait set to hit multiyear low
- Kuwait's current account surplus improves in 2017
(Writing by Shane McGinley; Editing by MIchael Fahy)
(shane.mcginley@thomsonreuters.com)
Our Standards: The Thomson Reuters Trust Principles
Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.
© ZAWYA 2018
