Skip to content Skip to Search
Skip navigation

Kuwait recovering but facing ‘substantial’ risks says IMF  

Kuwait economy IMF Reuters
The administration of Kuwaiti Prime Minister Sheikh Ahmad Kuwait's prime minister Nawaf al-Ahmad al-Sabah should phase out energy subsidies, said the IMF
  • GDP growth will slow to 0.1%
  • Country in ‘position of strength’
  • But political gridlock a threat

Kuwait’s economy is recovering post-pandemic, but risks to the oil producer’s outlook “remain substantial”, the International Monetary Fund (IMF) said in a new report.

In an assessment after annual bilateral discussions with the Kuwaiti government known as Article IV consultations, the fund estimated real gross domestic product (GDP) growth will slow to 0.1 percent in 2023 as a result of oil production cuts after growing 8.2 percent in 2022.

Kuwait is part of Opec+, which has been reducing crude output since November 2022 to prop up prices. Reforms should focus on curtailing the wage bill and gradually phasing out energy subsidies while improving targeted income support, the IMF said.

“Given Kuwait’s large fiscal and external buffers, it can undertake needed reforms from a position of strength. However, political gridlock between the government and parliament could continue to delay reforms,” the IMF said.

Resolving the impasse is needed to accelerate reform momentum, boost growth and diversify the economy, it added.

“Comprehensive and growth-friendly fiscal consolidation is required to reinforce fiscal sustainability and support intergenerational equity,” the IMF said.

It added that a fiscal expansion envisaged in the draft 2023-2024 budget is appropriate given a negative non-oil output gap.

Kuwait remains a wealthy economy, running a $21 billion budget surplus this year and has one of the lowest sovereign debt to GDP ratios globally, according to acting finance minister Saad Al-Barak. 

The 2023-2024 budget, based on an oil price of $80 per barrel, set spending at KD23.5 billion ($75.90 billion) and revenue at KD23.4 billion, according to a parliamentary committee report. 

The IMF recommended that Kuwait’s fiscal consolidation should aim to increase non-oil revenue and tackle current spending rigidities.

Added revenue measures can include introducing GCC-wide excises and VAT, as well as expanding corporate income taxation to cover domestic companies.

The administration of Sheikh Ahmad Nawaf al-Ahmad al-Sabah, the prime minister, last month announced a four-year programme featuring 107 major projects.

This includes a commitment to pass a long-stalled public debt law during the first year of the new parliament. 

The law has long been advocated by international ratings agencies and the World Bank, as well as by many government supporters. Yet, it has also proved a tough proposition for successive administrations. 

Political opposition is strong. Twenty Kuwaiti parliamentarians spoke out against the new debt law when the government introduced its programme to parliament on July 18.

“Governments have been trying to pass this for years,” Mohammad Al Jouan from the Kuwait Economic Society previously told AGBI.

But while passing a debt law has proved too much for governments in the past, it may be even more difficult now.

“Back in 2021, when this was being debated, interest rates were very low,” Al Jouan said. 

“Now they are high. It doesn’t make economic sense to be returning to the debt market at this time.”

Latest articles

Microsoft president Brad Smith and G42 CEO Peng Xiao (right) sign the $1.5bn investment deal in the presence of G42 chairman Sheikh Tahnoon bin Zayed Al Nahyan

Microsoft invests in UAE’s AI leader G42 

The US tech giant Microsoft will invest $1.5 billion in the Abu Dhabi-based artificial intelligence (AI) company G42 to help accelerate its global expansion strategy. As part of the deal G42 will run its AI applications and services on Azure, Microsoft’s cloud computing platform. Brad Smith, vice-chair and president of Microsoft, will join the G42 […]

Spinneys CEO Sunil Kumar and chairman Ali Al Bwardy. The company operates 75 grocery retail supermarkets in the UAE and Oman

Spinneys to offer 900m shares in Dubai IPO

Supermarket operator Spinneys will sell 25 percent of its business in an initial public offering (IPO) on the Dubai Financial Market (DFM), according to an intention to float document released on Tuesday. The company’s offering will be open from April 23 to April 29 for retail investors, while institutional investors can subscribe until April 30, according […]

Airport, Terminal, Aircraft

DXB remains world’s busiest international airport

Dubai International (DXB) has maintained its status as the world’s busiest international airport, beating London and Amsterdam, the Airports Council International (ACI), an association of world airports, said in a new report. DXB has secured the top place for the 10th consecutive year, with the number of international passengers reaching nearly 87 million in 2023, […]

Robots on the production line of an EV factory in Guangzhou, China. Saudi Arabia has yet to open its first EV manufacturing facility

EV imports rise in Saudi Arabia, but only to 779 cars

Saudi imports of electric vehicles rose sharply in 2023 – but to a total of just 779 EVs, despite government hopes that it can become a green economy leader through the manufacture and use of electric cars. The kingdom imported only 210 EVs in 2022, showing the mountain it has to climb to realise ambitions […]