KUWAIT- Kuwait is considering making an annual 10% transfer of state revenue to its wealth fund conditional on budget surpluses, a government official told Reuters, as it seeks to bolster its finances amid low oil prices and the coronavirus pandemic.
Despite its vast financial wealth, the oil exporting nation could see its deficit widen to over 11% of gross domestic product (GDP) this year from a 4.8% surplus last year, the International Monetary Fund has estimated.
Kuwait cannot access international debt due to parliament opposition to a debt law proposed by the government.
The Future Generations Fund, which is managed by the Kuwait Investment Authority (KIA), automatically receives 10% of the state's oil revenue every year. The KIA also manages the General Reserve Fund, which has been depleting at a fast rate to plug the budget deficit.
The official, confirming a report by local newspaper Al Qabas, said the government wants to make the 10% revenue transfer conditional on achieving a budget surplus. He said the government would submit legislation on that to parliament but did not specify when.
The move could save more than 1 billion dinars ($3.25 billion) in the current fiscal year, the official said on condition of anonymity.
Established in 1976, the Future Generations Fund invests state revenue abroad.
Ratings agency Fitch this year estimated KIA's assets at $527 billion, equivalent to 380% of Kuwait's GDP at the end of the financial year ending in March.
The Future Generations Fund accounted for about $489 billion of KIA's total assets, while the rest is in the General Reserve Fund, Fitch said.
S&P Global Ratings in March cut Kuwait's rating by one notch due to the economic and fiscal effects of lower oil prices.
($1 = 0.3079 Kuwaiti dinars)
(Reporting by Ahmed Hagagy, writing by Davide Barbuscia, editing by Nick Macfie) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: firstname.lastname@example.org))