Opec member Kuwait projected a record budget deficit for the fiscal year starting April 1 on the sliding price of oil, the finance ministry said on Thursday. The shortfall for the 2016-17 fiscal year is estimated at 11.5 billion dinars ($38 billion) or a massive 30 percent of gross domestic product (GDP) due to a sharp decline in oil revenues, the ministry said on its Twitter account. Spending was estimated at 18.9 billion dinars, just 1.6 percent lower than in the current year, the ministry said.
Revenues were projected at 7.4 billion dinars ($24.4 billion) of which oil income was estimated at $19.1 billion or just 78 percent of the public revenues. In the past, income from oil contributed more than 94 percent of revenues in the Gulf emirate, before the decline in crude prices. The budget was approved at a joint meeting of the cabinet and the supreme planning council on Wednesday night.
The oil income estimate for 2016-17 is 46 percent lower than in the current year, and 74 percent below the actual oil revenues in 2014-15, the ministry said. The oil revenues are calculated on the basis of a crude price of $25 a barrel, down from the current year's $45 a barrel. The price of Kuwaiti oil dived to as low as $19 a barrel last week. Currently it is hovering around $23 a barrel.
Kuwait has projected a shortfall of $23 billion in the current fiscal year, the first deficit after 16 years of surplus. The Gulf state, which has a native population of just 1.3 million, has built around $600 billion in fiscal reserves in those years. Figures posted on the finance ministry website show that actual income earned in the first three quarters of 2015/2016 fiscal year is $37.6 billion, or 46.2 percent lower than last year.
The Gulf state posted a provisional deficit of $8 billion in the first nine months. The shortfall normally swells in the last quarter due to accounting adjustments. All the Gulf Co-operation Council (GCC) states - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates - have posted deficits after oil prices lost three quarters of their value since mid-2014. The Gulf states have announced a series of austerity measures that included raising the prices of fuel products, electricity, water and others.
Kuwait has liberalised the price of diesel and kerosene and is considering cutting subsidies on other services. But it is facing difficulties to cut spending which has increased more than four folds since 2006, mostly on wages and subsidies, according to official figures. The wage bill in the new budget is estimated at $34 billion or 55 percent of total spending while subsidies account for 15 percent.