MEW pays KD 525m in dues to KPC
‘Additional payment of KD 375m expected to be transferred’
KUWAIT CITY, March 25: According to informed sources, the Ministry of Electricity, Water and Renewable Energy has transferred KD 525 million into the account of the Kuwait Petroleum Corporation (KPC). This amount is the delayed receivables from oil consumption in power generation. An additional payment of approximately KD 375 million is expected to be transferred to KPC’s account this week or within the next few days, reports Al-Rai daily.
They explained that with the expected payment, the total sums paid by MEW to KPC of its dues within a month will reach about KD 900 million. This constitutes an impressive percentage of KPC’s dues. It is expected that the remaining amounts due will be collected from the general budget for the upcoming financial year.
It is unlike the usual official payments during which funds are transferred to ministries and government agencies from their budgets without a binding condition for determining the purpose of accounting for their absorption, as the decision to spend from the budget was left in the hands of the transferee. With regard to MEW’s payments to KPC, it was done through a specific mechanism that was agreed upon for the purpose of payment.
Agreement
The agreement was four-way between the Ministry of Finance, the Public Authority for Investment, MEW and KPC. It has the entire account of KPC without using any percentage of it to cover any other liabilities.
In a later step, KPC will re-inject the same amount into the General Reserve Fund account as part of the due payments for public money. Therefore, the movement of funds in this cycle will be recycled between all parties related to payment, as the same liquidity will return to the first payment outlet without any decrease.
This formula achieved a double benefit for the four parties. On one hand, it provided a relative remedy of arrears between MEW and KPC, and thus relieved the burdens of debts and accumulated claims in the budget of the two parties in the current fiscal year, which ends on March 31.
On the other hand, this settlement ensured that the liquidity paid was re-injected into the general reserve again. Thus, the fund’s liquidity level was maintained at the time of the closing of the fiscal year without an accounting impact, especially since this allows the re-employment of the amounts of payments made between MEW and KPC in a settlement of other deficits registered in the public budget, which guarantees a decrease in the expected total deficit rate in the fiscal year.
The Ministry of Finance, the Public Authority for Investment, MEW and KPC have committed themselves to applying the mechanism for making the ministry’s payment to KPC for the first time, which is estimated at KD 525 million. The four parties are scheduled to maintain the implementation of the same payment cycle with the expected new batch estimated at KD 375 million within days.
In terms of the level of liquidity currently available in the General Reserve Fund, the sources stated that it is approximately KD 2.5 billion.
Liquidity
They said the liquidity levels in the fund are variable - increasing and decreasing - on the basis that the cash rates are determined according to the volume of financial flows from oil sales compared to the total payments made at the same time.
Regarding the total public expenditures recorded by the general budget against revenues since the beginning of 2023, the sources indicated that the public expenditures recorded for the month of January amounted to about two billion dinars compared to revenues of approximately 1.7 billion.
Expenses for the past month amounted to about KD 2.3 billion, compared to revenues of about KD 1.75 billion, attributing the increase in expenses during the past two months to the large additional main payments, including the payment of MEW to KPC.
The deficit recorded between public revenues and expenditures is not achieved during the months of January and February.
The sources stressed that the general budget recorded a deficit during the last four months, which can be attributed to the decline in oil revenues due to lower oil prices compared to the beginning of 2022, in addition to the delay in the flow of oil payments to the general reserve due to the delay in customers making the oil payments .