Kuwait public spending remains solid amid lower oil revenues
Government spending remained solid ten months into the fiscal year of 2014/15 (FY14/15) even as revenues fell. Government spending was up12.6%year-on-year (y/y) and stood at KD 11.9 billion fiscal-year-to-date (fytd) in January. Both current and capital spending witnessed healthy gains. Revenues growth continued to trend downwards on the back of lower oil prices.
The government’s interim surplus was at KD 10.4 billion, considerably lower than the KD 16.0 billion surplus witnessed during the same period a year ago. At this rate, the government surplus is forecast to log in a smaller surplus of approximately KD 4.1 billion for the full FY14/15 ending in March 2015.This would be the smallest surplus in six years. However, at around 8.7% of GDP it remains large by global standards.
Current spending expanded by 11.2% in January and came in at KD 10.9 billion fytd.”Miscellaneous expenditures & transfers”, which include military salaries and transfers to the social security fund, rose by 8.9% to KD 5.7 billion fytd. Wages & salaries grew by 6.7% to KD 3.0billion fytd; the smaller component of spending “goods & services” was up by a strong 26%and was at KD 2.1 billion fytd.
Capital expenditures have been historically higher for the most part of FY14/15, on the back of greater progress on the project execution front. Capital spending expanded by a solid 29% to KD 1.1 billion fytd in January. At 46% of the full-year budget, it remains higher than the 5-year average of 41%. Although “vehicles & equipment” spending, one of capital spending’s major components declined by 4.3% in January, it was more than offset by the robust 32% growth rate penciled in by the “projects, maintenance & land purchases” component.
Government revenues remained on a downward trajectory in January as oil prices continued to slide. Total revenues fell by 16% to KD 22.4 billion fytd, as oil revenues continued to decline. But at 111% of the full-year budget, total revenues are still higher than the conservative budget estimates. Oil revenues declined by 17.3% y/y in January, due to a drop in oil prices and a smaller decline in oil production. In the ten months to January, Kuwait’s export crude (KEC) price averaged$88per barrel, 14% lower than the corresponding period a year ago. Production fell by3%and averaged 2.86 million barrels per day.