Kuwait forecasts record KD 9.8 bn budget deficit

14/02/2026

Kuwait forecasts record KD 9.8 bn budget deficit

Kuwait's budget for the next fiscal year, starting April 202,7 is forecasted with a deficit of KD 9.8 billion, which is the largest in the country’s history. Total income is estimated at KD 16 billion, with 79 percent coming from oil revenues, while total expenditures are projected at around KD 26 billion, resulting in a shortfall of nearly KD 10 billion.

This deficit will likely be covered by borrowing from international banks, while keeping Kuwait’s overseas investments, valued at close to $1 trillion, intact to continue generating income for the state and future generations. The budget appears conservative, as it assumes oil prices could fall to $57 per barrel, a highly unlikely scenario.

OPEC+ will not allow crude oil prices to drop to such a level, which would harm all producers. A decline of more than $31 per barrel from the current $68 per barrel could even push some producers into bankruptcy. Our budget is so conservative that next year’s total income is expected to be more than KD 2 billion lower than the current year, while expenses are increasing by the same amount, resulting in a budget deficit of KD 2 billion. It is unlikely that oil prices will weaken, and they are expected to remain around $68-$70 per barrel for the rest of this year, with a similar level anticipated next year.

Once again, predicting lower prices next year is difficult. The only scenario that could significantly weaken oil prices is if Iran resumes full oil exports and returns to the market, which would impact global prices. In such a case, OPEC+ would almost certainly intervene, taking the necessary measures to stabilize the markets and maintain price levels, preventing any further decline. Budget deficits will likely persist for Kuwait and other OPEC+ countries, as oil prices are expected to remain relatively weak.

Global oil demand continues to be low, while the market is supplied with an extra surplus of 2.5 million barrels in stock, putting downward pressure on prices. However, prices are not expected to fall as low as $57 per barrel, resulting in an estimated KD 10 billion deficit for next year’s budget. Weak oil prices pose challenges for all producing countries, as none have developed alternatives to reduce dependence on oil.

Transitioning away from a single source of income is difficult, and there is insufficient creativity so far to address this reliance. In Kuwait, we have adopted another mechanism, which is perhaps not the best, for generating income by creating our Sovereign Wealth Fund, now worth more than $1 trillion in overseas investments and producing revenue. However, this is not an industry that can provide jobs for the more than 15,000 new graduates entering the workforce each year. The government must create and make these jobs available, which contributes to recurring deficits in the annual budget, accounting for 76 percent of total expenditures.

The weakest area in the budget is capital spending for future developments and investments, which covers only 12 percent of the budget. This should be higher to support projects that create sustainable and meaningful job opportunities. The KD 9.8 billion budget deficit can be addressed by borrowing from international banks, backed by our oil reserves and Sovereign Wealth Fund. It is time to establish a think tank to explore additional sources of income beyond the two we currently rely on.

By Kamel Al-Harami

Independent Oil Analyst

Email: naftikuwaiti@yahoo. com