Strong oil prices allowed Kuwait to record a budget surplus of around KD14.7 billion in the first eight months of the current 2012-2013 fiscal year but the balance is projected to slip at the end of the year because of higher spending, a key Kuwaiti bank has said.
The Gulf emirate is also expected to record a surplus of around KD10.3 billion in its 2013-2014 fiscal year although it has projected a deficit of KD3.05 billion.
Forecasts by the National Bank of Kuwait ( NBK ) showed the country's actual budget surplus could end the current year at KD13.1 billion (Dh173 billion) on an average oil price of $100.
During the first eight months of this fiscal year, which ends on March 31, the surplus was put at KD3.8 billion after allocations to the Reserve Fund for Future Generations (RFFG). Full year surplus could end the year at KD6.27 billion after allocations for FFFG.
In a study published this week, NBK said the actual surplus this year could have been higher but it was stifled by an increase in actual public expenditure.
"Latest public finance data show a significant boost in government spending in November. This may be linked to a correction of under-reporting issues, which likely underestimated actual spending in previous months," it said.
"Nevertheless, the headline rate of spending remains low relative to previous years. The rise in reported spending has capped large monthly increases in the budget surplus, despite soaring oil revenues…increases in the budget surplus have slowed significantly as a result of the recent acceleration in spending."
The report showed total revenues for the first eight months of the fiscal year (April-November) reached KD21.6 billion, on the backof soaring oil revenues.
The 15 per cent rise in oil receipts, however, is stronger than expected given a one per cent decline in Kuwait Export Crude prices and a 10 per cent increase in oil production over the same period, the report said.
Government spending climbed to KD6.9 billion in the first eight months, equivalent to one-third of the amount budgeted for the entire year.
Total spending surged by KD2.7 billion from October, with the year-on-year decline in spending slowing considerably to three per cent compared to 31 per ce3nt at the end of the previous month. "Nevertheless, a large part of the increase in spending during the month likely reflects the pick-up in reporting, rather than a fundamental acceleration in the rate of spending."
As for 2013-2014, the report showed a KD three billion budgeted deficit could turn into a surplus of around KD10.3 billion on the back of higher oil revenue.
It expected total revenue to climb to KD29.9 billion against budgeted revenue of KD18 billion. The report said its scenario involves unchanged spending at KD21.14 billion.