Kuwait may post KD 5bn deficit in FY 2016/17

Kuwait Times - - BUSINESS -

KUWAIT: By the end of Novem­ber 2016, the 8th month of the cur­rent fis­cal year 2016/2017 ended and av­er­age price for Kuwaiti oil for Novem­ber scored $41.5 per bar­rel, down by $5 per bar­rel (-10.8 per­cent) from the av­er­age of Oc­to­ber which was at $ 46.5 per bar­rel. But it is higher by $ 6.5 per bar­rel, 18.6 per­cent, than the new hy­po­thet­i­cal price es­ti­mated for the new bud­get at $35 per bar­rel. There­fore, the av­er­age Kuwaiti oil price for the first eight months of the cur­rent fis­cal year scored about $ 41.7 per bar­rel, which is less by $ 8.2 per bar­rel, -16.4 per­cent, than the av­er­age price for the first eight months of the last fis­cal year at $ 49.9 per bar­rel. The past fis­cal year 2015/2016 which ended on March 31, 2016 scored an av­er­age of $ 42.7 per bar­rel for Kuwaiti oil. This means the av­er­age price of oil for the first eight months of the cur­rent fis­cal year is lower by about 2.4 per­cent than the av­er­age price of the bar­rel of oil for the past fis­cal year.

Kuwait is sup­posed to have achieved ac­tual oil rev­enues in Novem­ber in the amount of KD 1 bil­lion. As­sum­ing that pro­duc­tion and prices would con­tinue at the cur­rent lev­els — an as­sump­tion which may not be re­al­ized — Kuwait would achieve about KD 12.3 bil­lion in oil rev­enues for the en­tire cur­rent fis­cal year, which is KD 3.7 bil­lion higher than the amount es­ti­mated for the en­tire cur­rent fis­cal year bud­get at KD 8.6 bil­lion. Adding an amount of KD 1.6 bil­lion in non-oil rev­enues, pro­jected bud­get rev­enues would score KD 13.9 bil­lion for the en­tire cur­rent fis­cal year. Com­par­ing this fig­ure with KD 18.9 bil­lion as ex­pen­di­tures al­lo­ca­tions, it is likely the bud­get would achieve a deficit by KD 5 bil­lion in the FY 2016/2017; how­ever, this fig­ure de­pends mainly on the av­er­age oil prices and its pro­duc­tion quan­tity in the re­main­ing part of the cur­rent fis­cal year (4 forth­com­ing months) and the likely con­trol of es­ti­mated ex­pen­di­tures, i.e. achiev­ing sav­ing therein.

To sum up, the fi­nan­cial deficit has be­come real and re­cur­rent. And in ad­di­tion to the in­evitable in­crease of ex­pen­di­tures in the fu­ture due to in­creas­ing pop­u­la­tion and in­fla­tion rates, a new and in­creas­ing item will be added to pay loans pre­mi­ums and in­ter­ests. Any il­lu­sion that the fi­nan­cial con­di­tions of the coun­try are com­fort­able, which will sti­fle the pub­lic ad­min­is­tra­tion’s ef­forts for re­form, will have se­ri­ous con­se­quences in the near fu­ture.

Pub­lic ad­min­is­tra­tion

About 25 years have al­ready passed since the lib­er­a­tion of Kuwait dur­ing which 11 par­lia­men­tary elec­tions were con­ducted, in­clud­ing seven rounds in the last 11 years (2006-2016), an av­er­age of one elec­tion ev­ery one year and slightly more than half the year -1.57 yearsand the av­er­age of vot­ers de­creased to 59.1 per­cent, while the av­er­age was one elec­tion ev­ery three and half years pe­riod (1992-2003) dur­ing which four elec­tions were con­ducted, and the av­er­age of vot­ers dur­ing the elec­tions reached about 81.5 per­cent. Quick elec­tions pace dur­ing the last pe­riod in­di­cate re­gres­sion in the demo­cratic ap­proach and gives ev­i­dence of the in­sta­bil­ity case. Re­sults of the lat­est elec­tions -of Novem­ber 2016- strongly sug­gest an an­gry re­ac­tion to pro­lif­er­a­tion of cor­rup­tion, ab­sence of devel­op­ment ap­proach and a feel­ing of anx­i­ety about the fu­ture.

The at­tached sched­ule dis­plays per­cent­ages of change in the 11 elec­tion rounds and the change rate in the num­ber of mem­bers of the cur­rent Na­tional Assem­bly scored 60 per­cent, the sec­ond high­est af­ter the re­voked Na­tional Assem­bly -De­cem­ber 2012which was an ex­traor­di­nary Na­tional Assem­bly in which vot­ers per­cent­age ac­counted for 39.6 per­cent, the low­est af­ter the 1990 Na­tional Coun­cil.

The num­ber of those who ab­stained from nom­i­na­tion from the num­ber of mem­bers in the pre­ced­ing assem­bly and who have great op­por­tu­ni­ties for suc­cess was a record num­ber. The re­cent change is close to the qual­ity of change in Fe­bru­ary 2012 elec­tions, which came as pun­ish­ment for both the for­mer Assem­bly and for­mer gov­ern­ment.

Chang­ing 30 deputies, in­clud­ing two Min­is­ters, is an in­di­ca­tor of the ex­tent of vot­ers’ anger, cor­rup­tion pro­lif­er­a­tion, poor achieve­ment and pri­or­i­ties in­ver­sion. The coun­try will reap the out­come of this change if the mes­sage is well re­ceived and un­der­stood, and the change was ac­com­pa­nied by a fun­da­men­tal change in the ap­proach and char­ac­ters of the forth­com­ing Gov­ern­ment which has much more au­thor­ity than that of the Na­tional Assem­bly, in­clud­ing par­tic­i­pa­tion by about 14 Min­is­ters who also serve as deputies. Un­for­tu­nately, early in­di­ca­tions sug­gest the op­po­site.

Ei­ther the mes­sage was not un­der­stood and the Na­tional Assem­bly will turn into a war zone whose be­gin­ning will be con­fronta­tions to change laws and an ap­proach by which the out­go­ing gov­ern­ment and assem­bly tried to hit and alien­ate their op­po­nents. They suc­ceeded su­per­fi­cially but the out­come of the elec­tion was a con­clu­sive in­di­ca­tor of their fail­ure in re­al­ity. Un­der the se­vere decline in the coun­try’s fi­nan­cial ca­pa­bil­ity cou­pled with the di­rect and proxy wars in the neigh­bor­hood, and the decline of the likely sig­nif­i­cance of oil in the en­ergy mar­ket in fu­ture, it is cer­tain that Kuwait will not en­dure the con­fron­ta­tion at­mo­sphere and more of break­ing the in­ter­nal sit­u­a­tion into pieces. Surely, clash would lead to the fail­ure of any fi­nan­cial and eco­nomic re­form ef­fort, in ad­di­tion to more of cor­rup­tion spread­ing to buy the Gov­ern­ment’s per­ma­nence.

The sum­ming up of the near fu­ture is a new dis­so­lu­tion of the Na­tional Assem­bly, to the sup­pressed an­gry and to the politi­cal chaos. And we only hope to stop the flow of lost op­por­tu­ni­ties and read the mes­sage cor­rectly. With each missed op­por­tu­nity the cost of re­form in­creases with less chances of suc­cess. Mus­cles shrink and mind is al­most ab­sent. Un­for­tu­nately, the out­go­ing gov­ern­ment may be cloned even though some or ma­jor­ity of its char­ac­ters may change.

Per­for­mance of Boursa Kuwait

Boursa Kuwait per­for­mance dur­ing Novem­ber 2016 was more ac­tive com­pared with Oc­to­ber’s per­for­mance. All in­dexes in­clud­ing traded value, trade vol­ume, num­ber of trans­ac­tions, and value of Gen­eral In­dex (AlShall) in­creased. AlShall in­dex read­ing in the end of Wed­nes­day, 30 Novem­ber 2016 scored 349.4 points, no­tice­ably up by 14.1 points, or by 4.2 per­cent, com­pared with its clo­sure in the end of Oc­to­ber at 335.2 points. It how­ever dropped by 29.5 points i.e around 7.8 per­cent com­pared with Novem­ber 2015. The high­est read­ing dur­ing the month was at 357.6 points on Novem­ber 15, 2016 and the low­est read­ing was at 335.6 points on Novem­ber 01, 2016. All main Boursa Kuwait in­dexes rose de­spite the slight decline in oil price vis-a-vis Oc­to­ber 2016, per­haps due to the pos­i­tive re­sults of some com­pa­nies. The price in­dex rose and scored 5,554.5 points (5,401.1 points in the end of Oc­to­ber 2016), a rise by 2.8 per­cent. Like­wise, the weighted in­dex rose to about 367.1 points (com­pared to 354 points), arise by about 3.7 per­cent. Be­cause most trad­ing was on big com­pa­nies’ shares. Kuwait 15 in­dex, also rose to 855.2 points (826.5 points at the end of Oc­to­ber 2016), a rise by 3.5 per­cent. When we com­pare the per­for­mance of the main in­dexes (price, weighted, and Kuwait 15) with their readings at the end of 2015, we no­tice their con­tin­ued losses by (-1.1 per­cent, 3.8 per­cent, and -5.0 per­cent) re­spec­tively.

Value of traded shares (dur­ing 22 work­ing days) scored KD 328.5 mil­lion ($ 1.082 bil­lion), an in­crease by KD 70.5 mil­lion, or by 27.3 per- cent, com­pared with the pre­vi­ous month, which scored KD 257.9 mil­lion. It re­mained higher by 4.9 per­cent than its value in the same month of 2015. The high­est daily trad­ing value dur­ing the month was at KD 22.2 mil­lion on Novem­ber 08, 2016, while the low­est daily trad­ing value was recorded on Novem­ber 27, 2016 at KD 4.5 mil­lion. The daily av­er­age value of traded shares scored KD 14.9 mil­lion (KD 12.3 mil­lion in Oc­to­ber 2016), a rise by 21.6 per­cent. The bank­ing sec­tor took the lead in liq­uid­ity and cap­tured KD 118.9 mil­lion, or by 36.3 per­cent of to­tal mar­ket trad­ing value.

The fi­nan­cial ser­vice sec­tor came sec­ond by 19.5 per­cent and thirdly came the real es­tate sec­tor by 10.7 per­cent. To­tal vol­ume of traded shares scored 2.908 bil­lion shares, up by 73.1 per­cent when com­pared with 1.679 bil­lion shares at the end of Oc­to­ber 2016. The daily av­er­age ap­proached 132.2 mil­lion shares up by 52.2 mil­lion shares or 65.3 per­cent. Num­ber of trans­ac­tions scored 70.6 thou­sand, a daily av­er­age of 3,210 trans­ac­tions re­flect­ing a rise by 49 per­cent (2,154 deals in Oc­to­ber 2016). Mar­ket cap­i­tal­iza­tion value of all listed com­pa­nies -186 com­pa­nies- af­ter list­ing Safat Global Hold­ing, dur­ing Novem­ber 2016 scored about KD 25.362 bil­lion. If we com­pare their value with the end of Oc­to­ber 2016 for 185 com­pa­nies, we note they scored KD 25.360 bil­lion, up by 3.7 per­cent, which re­flects the rise in the weighted in­dex. But if we com­pare their value with the end of De­cem­ber 2015 for 185 com­pa­nies, we note they dropped by KD 721.4 mil­lion, from KD 26.082 bil­lion to KD 25.360 bil­lion, or a drop by 2.8 per­cent. It is worth men­tion­ing that the num­ber of gain­ers com­pared with the end of 2015 was 70 com­pa­nies out of 185 com­mon com­pa­nies. 108 com­pa­nies recorded vary­ing drops in their val­ues, while val­ues of 7 com­pa­nies did not change.

Af­ter ex­clud­ing the com­pa­nies whose cap­i­tals were ei­ther in­creased or re­duced, Kuwait Bahrain In­ter­na­tional Ex­change Com­pany scored the high­est rise in value by 1053.9 per­cent. GFH Fi­nan­cial Group came next by 289.5 per­cent rise. On the other hand, Taiba Kuwaiti Hold­ing Com­pany scored the high­est drop in value by 75 per­cent and Ikarus Petroleum In­dus­tries Com­pany came next in losses by 65 per­cent of its value. Six sec­tors, out of twelve, in­creased in value with the Health­care sec­tor achiev­ing the high­est gain by 31.6 per­cent. The in­surance sec­tor scored the high­est drop by 14.9 per­cent. The fol­low­ing graph il­lus­trates the distri­bu­tion of mar­ket value ac­cord­ing to sec­tors as of the end of Novem­ber 2016.

Weekly per­for­mance of Boursa Kuwait

The per­for­mance of Boursa Kuwait for last week was mixed com­pared to the pre­vi­ous one, where the traded value in­dex, the traded vol­ume in­dex, and the num­ber of trans­ac­tions in­dex, showed a de­crease, while the gen­eral in­dex showed an in­crease, AlShall In­dex (value weighted) closed at 352.6 points at the clos­ing of last Thurs­day, show­ing an in­crease of about 0.4 points or about 0.1 per­cent com­pared with its level last week and it de­creased by 13.3 points or about 3.6 per­cent com­pared with the end of 2015.

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