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Kuwait to use budget surplus to replenish fund to cover deficits

People, Person, Parliament REUTERS/Stephanie McGehee
The budget set spending at KD23.5 billion and revenue at KD23.4 billion

Kuwait will use an expected budget surplus for fiscal year ending March 31, 2023 to replenish its general reserve fund (GRF), its finance minister said, after running down the GRF during the COVID-19 pandemic when oil prices dropped.

The oil-producing Gulf state’s parliament on Tuesday approved the 2022/2023 government budget after a delay caused by a political standoff that led to a dissolution of the previous assembly and an early election held in September.

The budget set spending at KD23.5 billion ($75.90 billion) and revenue at KD23.4 billion, according to a parliamentary committee report seen by Reuters. It is based on an oil price of $80 per barrel.

“(Oil) prices today and for awhile are above this price, and this will result in surpluses in the next final account (of the budget),” finance minister Abdul Wahab al-Rasheed said, without specifying how big the surplus would be.

“And through these surpluses we seek to restore the general reserve,” he said after Tuesday’s parliament meeting.

The GRF, the sovereign fund used to cover state deficits, was squeezed by the pandemic and a fall in oil prices. Due to legislative gridlock over a debt law allowing Kuwait to tap international markets, the GRF resorted to asset swaps with Kuwait’s future generations fund (FGF) to raise money.

FGF is a nest egg for when the OPEC member state’s oil runs out. A law in 2020 halted a mandatory annual transfer of 10 percent of state revenue to the FGF.

Independent think tank AlShall Consulting estimated that Kuwait’s budget surplus would be KD2.2 billion at the end of September, and it anticipates total revenues to be KD31.8 billion by the end of the fiscal year “if the level of production and prices remained unchanged”.

An earlier draft of the state budget for the fiscal year starting April 2022 put spending at KD23.065 billion compared with KD23.048 billion in the 2021/2022 budget.

The finance minister had said in August that the government had been working based on the 2021/2022 budget in the absence of parliamentary approval for the next one.

The latest budget report showed additional spending included KD300 million for cash compensation to government employees for outstanding annual leave, as well as KD157 million dinars for new categories of pandemic frontline workers.