Kuwait posts budget surplus of KD 14.4 billion in 10 months for FY 2011-12

Kuwait's budget for the fiscal year (FY) 2011-2012, shows positive signs during the first ten months ended last January, as the surplus rose up to 14.4 billion Kuwaiti dinars, against a predicted deficit of about KD 6 billion, a particular economic report showed Friday.

The report, by Kuwait Finance House (KFH) Research, a research subsidiary of KFH a leader in Islamic Bank Middle East, pointed out that Kuwait posted revenues of KD 24.2 billion during the 10 months on the back of higher oil revenues, while spending still remains less than expected, with total spending in the first ten months of KD 9.8 billion, diminishing by more than half of the budget allocation of KD 19.4 billion.

"Kuwait's monthly budget surplus increased by 61.1 % year-on-year (YOY) to KD 1.2 billion in January 2012 (December 2011: KD1.6 billion) from KD 0.8 billion in January 2011 which translates to a provisional budget surplus of KD14.4bln in the first ten months of the fiscal year (FY) 2011-12," reads the report.

In terms of spending, for the first ten months of FY 2011-2012, budget expenditure totaled to KD 9.8 billion, which is still far below than the initial budget estimate of KD 19.4 billion for FY 2011-2012.

"Kuwait regularly projects a higher expenditure based on its prudent underestimation of oil prices but achieves lower expenditure. Nevertheless, total government expenditure rose by 50.1 percent y-o-y to KD 1.5 billion in January 2012 from KD 1.0 billion in January 2011 as the Kuwait government increased its social spending through direct transfers and hike in pensions and public sector wages, For instance, in March 2012, the Kuwait government announced a large rise in public sector wages while encouraging reduction on food prices. The official announcement suggested the government workers would receive a 25.0 percent hike and pensioners would receive 12.5 percent pension rise," said the report.

The report expected gross domestic product to remain strong in light of the surplus at an annual rate of 5.4 percent for the current year.

"Kuwait is in a stronger position to attain its fiscal target underpinned by high crude oil prices and increased oil production. Furthermore, the current international oil prices (100 US dollars per barrel) are well above the Kuwait's fiscal breakeven average price of $80 pb," it said.

Kuwait's crude oil productions remained high at 2.7 million barrels per day (bpd) in March 2012, and expect to bode well throughout 2012 as it begins to produce closer to its estimated capacity of 2.7 million bpd and as new fields come on stream. According to the Organization of the Petroleum Exporting Countries (OPEC), Kuwait's territorial boundaries contained an estimated 101.5 billion barrels of proven oil reserves, roughly seven percent of the world total. -KUNA- Al Watan Daily