Kuwait to Mull $70 Billion Annual Spending Cap for 3 YearsBy
Official says aim to help government set longer debt strategy
Kuwait is trying to reform economy by reducing reliance on oil
Kuwaiti officials are considering an annual public spending cap of 21 billion dinars ($69.5 billion) on average over the next three fiscal years to help the government plan future debt sales, a senior official said.
The cap is being included in a proposed budget for the fiscal year starting in April, the official said, asking not to be named because he isn’t authorized to discuss the plans. Total expenditure for the current fiscal year is estimated to reach 19.9 billion dinars, the official said. Finance Ministry officials didn’t immediately respond to requests for comment.
Oil-rich Kuwait raised $8 billion in March in its first sale of international bonds, joining other members of the Gulf Cooperation Council seeking to plug rising budget deficits after the slump in crude prices. Its parliament is also studying a draft debt law that would allow the sale of 30-year bonds for the first time, and raise the debt ceiling to 25 billion dinars from 10 billion dinars in the current legislation that expired this year.
“Kuwait has one of the strongest balance sheets” in the Gulf, with low leverage and a large amount of foreign assets, Jean-Michel Saliba, an economist at Bank of America Merrill Lynch, said in a report. Even so, its budget deficit -- excluding investment income -- is among the region’s largest, suggesting it needs “repeated large issuance” of international bonds, he said.
Lawmakers are unlikely to approve sharp consolidation, so reforms are likely to proceed gradually and in a non-disruptive fashion, Saliba said in the report emailed on Sunday.
Kuwait’s government is aiming to cut its budget deficit to 3 billion dinars by 2021 from 6.6 billion dinars currently, excluding money set aside for the Future Generations Fund, the official said. Ministries and government departments have been instructed to submit a list of top spending priorities for the 2018-2019 budget, the official said. The government must submit the 2018-2019 budget to the parliament by Jan. 31 for a vote.