Kuwait’s cabinet on Tuesday approved the 2020/2021 budget projecting a huge deficit for the sixth year in a row due to low oil prices, the finance minister said.
The Gulf state whose revenues heavily rely on oil prices projected a shortfall of $25.3 billion for the fiscal year starting in April, up 15 percent on the current year, Mariam al-Aqeel said.
“The budget deficit is the result of a drop in oil production and prices,” the minister told a press conference in Kuwait City.
She said the government decided to keep spending unchanged from the current fiscal year at around $74 billion, of which 71 percent are allocated to civil servants wages and public subsidies.
Revenues are projected at $48.7 billion, 6.0 percent lower than the current year’s estimates. More than 87 percent of income comes from oil.
Since the crash in oil prices in mid-2014, Kuwait followed other oil-rich Gulf countries in raising fuel and electricity prices but could not impose taxes due to stiff opposition from parliament.
Aqeel said the government will draw down on the state reserve fund to meet the budget deficit as parliament has refused to pass legislation to allow the government to borrow.
The minister said the government will press for parliament’s approval of the public debt law because borrowing is cheaper than withdrawal from the sovereign wealth funds.
She said the government also wants parliament to approve a law for imposing selective taxes like other Gulf states, describing the law as necessary.
The emirate, with a native population of just 1.5 million, has a sovereign wealth fund worth more than $600 billion, providing a cushion for state finances.
Around 3.3 million foreigners live and work in Kuwait.