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

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.