‘Higher’ oil price is not the solution for Kuwait

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Appetite for spending high

THERE is no doubt that an oil price of $75 per barrel will reduce our budget deficit but not much. We will still end up being about KD 10 billion short from the current budget. This is because the higher the price, the higher the appetite for spending. We in Kuwait just do not have the will, determination and real guts to do what is necessary. We are simply going by oil and when we fail in doing so, we go back knocking on our sovereign wealth fund to take from it. What is legitimate or not does not matter… The government will use any means, ways, and tools for this purpose. Of course, the public is also neither interested nor feeling the pinch yet about the consequences that will shock us soon.

Kamel Al-Harami

Last week, passing the state budget was an indication of how bad the situation is. The budget was approved without a single question or comment. It was simply passed with such drama but what is important was that it was passed, regardless. The simple fact as to why we are escalating our budget every year while depending on a sole single source of income and the need to cater for the previous deficits was ignored, along with any attempt to reduce a single item from the governmental expenditure. How can we manage such a budget without looking around us in order to try to follow the actions of our neighbors, especially considering that most of them are poorer than us but are striving hard to improve their economic situations and are looking and working on serious solutions? We are not living empty handed but are not taking any serious initiatives to improve our daily life, despite the freedom of press here to express our opinions and feelings over the current lack of positive action.

The base price for our current budget is $45, resulting in a shortage of KD12 million with an improvement in the current oil price by $30. However, to balance Kuwait’s needs, a price close to $100 per barrel is needed. This will not happen… And if it does, it would not last long. However, what is bad is that the government, without any hesitation, started spending as nothing happened or will happen in the coming years. There is no doubt that the oil price will get higher, and OPEC Plus will fully understand the game and closely monitor the supply /demand picture for disciplining the supply in good order and making sure none of its members cross the board. It is time for oil producing countries to learn from the past when the oil price was $25 a barrel. Most of them searched for an alternative but many among them opted to cut costs and expenses and introduce Value-Added Tax or some sort of expenses to curb demand of any sort.

However, this did not happen in Kuwait. It continued with the same pattern and jumped on our foreign reserve without hesitation despite the public outcry. We are the only nation that will do nothing but complain to each other and in our media, and keep bickering without taking any tangible action. We just do not know for how long we can continue to be passive without any single goal in hand for present or future, despite international recommendation from all sources.

By Kamel Al-Harami Independent Oil Analyst

email: [email protected]

This news has been read 24827 times!

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