Kuwait’s oil revenues to reach KD 30bn

KUWAIT: By the end of July 2022, the fourth month of the current fiscal year 2022/2023 ended with the monthly average price of the Kuwaiti oil reaching $109.3 per barrel. It is $44.3 or 68.2% higher than the new estimated hypothetical price of $65 for the current budget and $64.3 higher than the average hypothetical price of US$ 45 for the past fiscal year. The average price during July is 36.9% higher than the yearly average price of $79.9 per barrel recorded in the past fiscal year 2021/2022. According to the Ministry of Finance, the average price for July is $34.3 higher than the new budget’s parity price of $75 (without the deduction of 10% of revenues for the future generations’ reserve). Kuwait is supposed to have achieved actual oil revenues of KD 2.510 billion in July. Assuming that production and prices would continue at the current levels - an unrealistic assumption - Kuwait’s oil revenues for the entire current fiscal year would reach KD 30.370 billion, after deducting annual production costs pertaining to the entire current fiscal year. It would be KD 13.629 billion higher than the estimated figure of revenues of KD 16.741 billion for the current budget. Adding KD 2.078 billion in non-oil revenues, total expected revenues for the current fiscal year would amount to KD 32.448 billion. Comparing this figure with the expected expenditures of KD 21.949 billion, it is likely that the public budget to achieve a surplus of KD 10.499 billion. With oil revenues being the only contributing factor with an oil market situation that is exceptional due to the Russian/Ukrainian war, a prudent fiscal policy that quantifies future risks is required, which are inevitable and substantial in anticipation of falling into the repeated pitfalls of the past. With oil revenues being the only contributing factor to the surplus, at a time where the oil market is exceptional due to the Russian/Ukrainian conflict, a prudent hedging policy is required. A discount factor that quantifies future risks should be estimated, as those risks may be substantial and inevitable in case of repeated pitfalls from the past.