Kuwait's government projects a budget deficit of KD7.9 billion ($25.9 billion) in the new fiscal year starting on April 1, finance minister Anas Al Saleh said.

That forecast is after a contribution of 10 per cent of revenues to the sovereign wealth fund, and conservatively assumes an average oil price during the year of $45 a barrel, Saleh said in a briefing on the government’s economic plans. Brent crude oil is currently around $55 a barrel. Spending is projected at KD19.9 billion next fiscal year and revenues at KD13.3 billion.

Anas Al Saleh added that Kuwait is continuing procedures to issue an international sovereign bond but could not give a time frame for a sale that’s expected to help cover the budget deficit.

The government planned to offer KD3 billion ($9.8 billion) in bonds to international investors at the beginning of 2017, Saleh said last November.

National Bank of Kuwait and investment firm Kamco said they had been invited by the government to participate in the issue.

The projected budget deficit of KD7.9 billion in the new fiscal year starting on April 1 will be covered with reserves and issues of both domestic and international bonds, Saleh said at a briefing on the government’s economic plans.

OUTLOOK

The Kuwaiti Parliament is currently examining legislation that would scrap the subsidy cuts introduced last year in an effort to rein in the country’s large fiscal deficit. The move is at odds with region-wide efforts to end the era of generous subsidies, which had been predicated on high oil prices, and prepare for a post-oil future, said FocusEconomics in its report.

Should the measure pass-the government has vowed to fight the move-it would become difficult for the government to deliver on the $6 billion reduction in the country’s fiscal deficit foreseen in its recently passed budget for financial year 2017/18. As part of the government’s efforts to bring its public finances under control, the cabinet instructed the Ministry of Finance to implement an expenditure ceiling.

GROWTH

Publicly-backed investment, part of the government’s wider strategy of diversification, will support the economy this year, as will strengthening oil prices. FocusEconomics Consensus Forecast panelists expect GDP to increase 1.5 per cent in 2017, which is down 0.1 percentage points from last month’s forecast. For 2018, panelists see GDP growing 2.5 per cent. Inflation in January was 3.3 per cent (December: 3.5 per cent). Panelists expect inflation to average 3.4 per cent in 2017, which is unchanged from last month’s forecast. For 2018, they see inflation at 3.5 per cent.