Kuwait’s oil price must reach $91 per barrel in next year’s budget

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This is the base figure in our budget of KD 25 billion for next year from April 1, which is lower than the current budget by KD 2 billion, to avoid a deficit, which is currently estimated to be KD 6 billion or $18 billion. It is worth highlighting that the government announced its equilibrium price for the first year to balance the budget, as our budget is based on a crude oil price of $70 per barrel, which is a conservative figure. However, it is unlikely that the oil price will reach such a level; it will remain at around $75 to $80 per barrel. It will be an achievement if our government manages to reduce its expenses but it is worth trying. It should try to hire more or provide more than 24,000 job opportunities in the coming 12 months, which is a real challenge for our new Prime Minister and his government.

Now that few figures are announced and published, the most important number in the whole budget was not disclosed, which is Kuwait’s crude oil production for the next year. For a drop in the deficit by KD 2.5 billion, oil production can be estimated at around 2.8 million barrels per day, equal to KD 22 billion. For a balanced budget without defi- cit, the estimated crude oil price should be $ 80 per barrel and crude oil production 2.8 million barrels, without any need for the oil price to reach $91 a barrel. It will indeed be a blessing if it hits that magical number. We are expected to incur about KD 6 billion deficit in our current year’s budget, as there remain more than 55 days to close our books for the current fiscal year, which ends on March 31.

This will bring us another challenge, which is how to tackle and address the shortage of KD 6 billion. Will it be by borrowing from international banks, or by borrowing from our sovereign wealth funds? Or will they think out of the box and privatize some of the oil companies, which will help with dealing with the shortage of funds? It is the best way, as it serves two purposes at the same time. It provides easy cash to the government, and it enhances the health of the private sector and our economy in recruiting and developing national graduates. It is indeed the best solution, but it needs some hard work and effort from both the government and the private sectors. Certainly, we see a positive budget with lower expenses and lower deficits from previous years. The question however is regarding maintaining such a level of expenditure. We wish our new government and its head all the success in reducing our budget without any form of borrowing. It is time for a new era.

By Kamel Al-Harami
Independent Oil Analyst

Email: [email protected]

This news has been read 1359 times!