Kuwait may borrow up to $16.5B to finance budget deficit
The actual budget deficit for the 2015/2016 fiscal year which ended on March 31 is KD 5.5 billion, the first actual deficit to be posted by Kuwait after 16 years of surpluses. (File photo)
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Kuwait's National Assembly yesterday overwhelmingly approved the 2016/2017 budget which is projecting a huge deficit as the finance minister said Kuwait plans to tap international debt markets to plug the shortfall. The assembly also approved a draft law restoring the four-day preventive detention at police stations at the request of Interior Minister Sheikh Mohammad Al-Khaled Al-Sabah. The detention was cut to 48 hours by the 2012 assembly which was dominated by the opposition. Before winding down for the summer recess, the assembly also decided to delay debating judicial independence laws until the next term and MP Awdah Al-Awdah relinquished his membership in protest at the assembly failure to debate two reports on alleged corruption.
Finance Minister Anas Al-Salah said that the ministry has devised a public debt strategy to borrow from the domestic and international markets in a bid to finance the budget deficit resulting from declining oil prices. He said that the ministry plans to borrow up to KD 2 billion from the domestic market through conventional bonds and Islamic sukuk. The ministry also plans to borrow up to KD 3 billion from international markets through bonds and sukuk, Saleh said. The remaining part of the deficit will be financed from the state reserve fund, he said.
Saleh said that the actual budget deficit in the 2015/2016 fiscal year which ended on March 31 is KD 5.5 billion, the first actual deficit to be posted by Kuwait after 16 years of surpluses.
Saleh warned that although the financial position is currently strong, the country is facing serious challenges that endanger the stability and sustainability of the state finances. Revenues in the budget are projected at KD 10.24 billion while spending was estimated at KD 18.9 billion, thus leaving a shortfall of KD 8.66 billion. Oil income was estimated at KD 8.8 billion which was calculated at an oil price of $35 a barrel instead of $25 a barrel initially.
Oil income, which traditionally made up around 95 percent of the revenues when prices were high, is projected to contribute just 86 percent this year. Head of the Assembly budgets committee MP Adnan Abdulsamad said that the wages bill accounts for more than half of the budget and subsidies account for 15 percent.
He said that current expenditures make up 85 percent of spending. A number of MPs called on the government to diversify and restructure the domestic economy to cope with a prolonged period of low oil prices. Meanwhile, MP Awdah, head of the educational affairs committee, quit his parliamentary seat after the National Assembly refused to debate two investigations on corruption cases yesterday. The assembly only delayed the debate until next term.
During the debate on restoring the preventive detention, the interior minister stressed that the ministry agencies were ready to prevent any terrorist attacks on Kuwait. The amendment increases preventive detention at police stations from two to four days and to 21 days from 10 days at the public prosecution. Detention periods were reduced in 2012 by the opposition-dominated assembly. Before closing the assembly term, Speaker Marzouk Al-Ghanem emphasized on the “historic” achievements of the National Assembly. He declared the term closed and said the next term will start in October.
By B Izzak
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