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WITH an oil price level of $90 per barrel being the new equilibrium number, expenditures and deficits in Kuwait’s budget are increasing further, leading to a higher deficit of KD 12 billion ($36 billion) for the budget of next year ending in March 2022. Despite this, our government is not moving forward to curtail our expenses, which are still growing at a rate of KD one billion per annum.
Its estimate for Kuwait’s crude oil price is $45 a barrel, while the cost of production is increasing to KD 3.167 billion or $9 billion, or about $12 per barrel. The budget for next year, which will start from April 1, does not show any sign of austerity or consideration for the current difficult financial situation.
At the same time, all our neighboring countries are working on cutting down expenses and introducing difficult measures to avoid any shortage in government income and opting for the hard choice of introducing taxes and reducing subsidies. How could our parliament approve such a budget when its most important elements are on the rise and escalating year after year, starting with annual expenses, and increase on crude oil production cost? This is especially with less income at a crude price of $45 per barrel and less oil production at 2.2 million when compared to the government figure of 2.4 million, knowing well that such an estimate was based on the OPEC decision and quota.
Meanwhile, the government has not given any answer regarding ways to handle and tackle our ongoing yearly shortage of cash, and its short-term or longterm solutions. It is simply guess working and plugging in numbers, and following the copypaste method. Furthermore, the government is not proposing possible solutions of outside borrowing or selling some of its local assets for generating cash, or devaluing the value of our currency. These are real and realistic options and must be fought for inside the parliament.
Do we have the stamina for it or do we leave to the next one, while failing to correct our downgrading economy? Certainly, this is another expensive budget with an increase in every section and reduction in most important elements of oil by value and volume. Kuwait is continuing with its eighth year of deficit with no solutions. With that, Kuwait needs a net price of $ 90 a barrel to balance this budget, which is impossible to achieve. Alas!
By Kamel Al-Harami Independent Oil Analyst