KUWAIT - Kuwait's finance ministry has proposed a draft 23.05 billion dinar ($76.2 billion) budget for the fiscal year starting on April 1, it said on Monday, forecasting a lower deficit for the coming fiscal year.
The Gulf state, which despite its wealth is facing a large deficit due to lower oil prices and a liquidity crunch due to a political deadlock, expects a deficit of 12.1 billion dinars in fiscal 2021/2022 - 13.8% narrower than the deficit budgeted for the year ending on March 31.
An OPEC member state, Kuwait has been hit hard by lower crude prices and the coronavirus pandemic.
Repeated rows and deadlocks between cabinet and the elected assembly have led to successive government reshuffles and dissolutions of parliament, hampering much needed economic reforms.
The finance ministry based its 2021/2022 proposed budget on an oil prices assumption of $45 per barrel and on a production of 2.4 million barrels per day, it said.
That compares with an average oil price of $30 per barrel underlying its budget for the year ending in March 2021, and translates into expectations of annual revenues of 10.9 billion dinars in the next fiscal year, a 45.6% increase.
Kuwait plans to boost spending by 6.9% in the coming fiscal year.
Reforms in a country whose citizens are accustomed to a cradle-to-grave welfare system have struggled to take off over the past few years, despite economic diversification plans in an era of lower oil prices.
State salaries and subsidies are expected to account for over 70% of the total budget in the next fiscal year.
Moody's downgraded Kuwait's rating last year, citing higher liquidity risks and weaker governance and institutional strength, after a deadlock over funding strategy meant Kuwait has been unable to pass a new debt law allowing it to issue international debt to cover its large deficit.
"We look forward to more cooperation and collaboration with Kuwait’s Parliament to introduce and amend more laws that will benefit and improve our fiscal framework, and to empower Kuwait’s economy," the finance ministry said on Monday.
($1 = 0.3024 Kuwaiti dinars)
(Reporting by Ahmed Hagagy and Ahmed Tolba; Writing by Yousef Saba and Davide Barbuscia; Editing by Bernadette Baum) ((Yousef.Saba@thomsonreuters.com; +971562166204))