Kuwait’s budget surplus widened to 13.2 billion dinars ($47.6 billion) in the first nine months of its 2011-12 fiscal year, nearly double its year-ago level on higher than expected oil income and lower spending, central bank data showed.
The surplus accounted for 37 percent of the OPEC member’s 2010 gross domestic product, the last year for which figures are available, according to Reuters calculations. It stood at 7.0 billion dinars in the same period a year ago.
Revenues were 21.4 billion dinars in April-December, while spending was 8.3 billion dinars, a mere 42.5 percent of the full-year plan, the data posted on the central bank’s website cbk.gov.kw showed. Kuwait is one of the world’s top 10 oil exporters.
“Kuwait has seen a volatile year in 2011 and this is certainly impacting their spending plans,” said Nancy Fahim, economist at Standard Chartered in Dubai.
Kuwait’s budget spending has tripled since 2004, with a record 19.4 billion dinars planned for fiscal year 2011-12, which started in April, fueled in part by rising wage costs.
Kuwait also boosted social spending in 2011, including cash grants and free food rations for its citizens, mirroring a trend seen in much of the Gulf as unrest swept through the Middle East, although it saw only small scale protests last year.
“There has been a limited progress on their four-year development plan, which was very ambitious but we have seen most of the expenditures go toward current expenditures, mainly wages and salaries,” Fahim said.
“It is important to address public needs and public demands but at the same time we want to see expenditure into a longer term projects that can bring about growth,” she said.
Parliament cleared a $110 billion development plan in February 2010, aiming to diversify away from oil and boost the private sector, but little has been spent so far, partly due to political clashes which led two governments to resign last year.
Following last week’s parliamentary elections, ratings agency Fitch warned that ongoing “friction” within Kuwait’s government would continue to weigh on reforms and hinder political effectiveness.
In August, Kuwait’s ruler said the misuse of budget surpluses, including unproductive spending, has helped create structural imbalances in the Gulf Arab economy.
The country of 3.6 million people has no plans to boost budget spending in the next fiscal year, nor does it expect budget cuts, its finance minister said in September.
Oil revenue reached 20.3 billion dinars in April-December, accounting for 95 percent of the total, the data showed. The 2011-12 budget is based on an oil price of $60 per barrel.
Brent crude prices have been floating between $98 and $127 per barrel since the fiscal year started in April.
On Thursday, Brent crude held near six-month highs above $117 per barrel supported by worries of supply disruptions due to tension in the Middle East and hopes that Greece was closer to a debt deal among other factors.
Revenue was set at 13.4 billion dinars in the 2011-12 budget, approved by parliament in June 2011, bringing the projected deficit to 5.99 billion, or 16.8 percent of 2010 gross domestic product, according to Reuters calculations.
However, the 2011-12 revenue estimate is very conservative given last year’s surge in the price of oil.
A Reuters poll in December forecast Kuwait’s economic growth would slow to 3.5 percent in 2012 from an estimated 4.5 percent last year and generate a fiscal surplus of 22.9 percent of GDP in 2011-12, the largest among Gulf Arab oil exporters.