Kuwait to record high fiscal surplus in 2012-2013

Strong oil prices will ally with lower spending to allow Kuwait to record another large budget surplus in the current 2012-2013 fiscal year albeit lower than the previous year’s surplus, according to a key Kuwait bank.

National Bank of Kuwait assumed three cases for the price of Kuwaiti crude, including $103.8 in the low case, $106.1 in the mild case and $106.9 in the high scenario.

In all case, the price is more than 50 per cent above the $65 price assumed by the OPEC member in its 2012-2013 fiscal year, which started on April 1.

NBK said the recently approved, and much delayed, budget for FY2012/13 shows a nine per cent budget-on-budget increase in planned spending to KD 21.2 billion (Dh285 billion), as well as oil revenues based on a conservative average price assumption.

“If as we expect, spending comes in at 5-10 per cent below the government’s forecast and oil revenues much higher, the budget could ultimately see a surplus of between KD 9.8 billion and KD 12.8 billion
before allocations to the Reserve Fund for Future Generations (RFFG),” NBK said in a study.

It said the projected surplus would be around 20-26 per cent of GDP, compared to the 30 per cent recorded last year.

The report showed high oil prices could sharply boost Kuwait’s actual crude export earnings to nearly KD30.2 billion in the high price scenario.

This will push overall revenue to around KD31.8 billion, more than twice the budgeted revenue of nearly KD13.9 billion, it said.

Actual spending could be around KD19.1 billion in the high price case, below the budgeted expenditure of around KD20.17 billion.

The report expected the actual surplus at KD9.76 billion in the low price case, about KD10.9 billion in the mild price case and KD12.7 billion in the high price scenario.

Kuwait, a major OPEC producer, has recorded large fiscal surpluses over the past decade due to strong oil prices and spending curbs. The surplus was in contrast with fiscal situation during the 1990s, when
the emirate suffered from huge shortfalls because of low crude prices and war costs.

Kuwait pumped over 2.5 million barrels per day of crude this year while it sits atop nearly 101 billion barrels of extractable oil deposits.

By Staff, November 25, 2012