There is a distinct air of frustration swilling around in Kuwait City. The oil-rich Gulf capital has long benefitted from a stream of black liquid cash that has kept its books in check for fourteen years, but it has little to show for it and with the gravy train expected to slow well before the end of the decade, those with any sense of forward thinking are begging the question: what will become of Kuwait?
“The reliance on oil is quite dangerous. I think we have completely failed in addressing this major imbalance,” chairman of Kuwait Banking Association (KBA) and Ahli United Bank, Hamad Al Marzouq said during a recent finance conference.
“We lack a clear strategic vision here in Kuwait.”
While its neighbours Qatar and the UAE have ploughed much of their oil wealth into investments as varied as ambitious real estate developments, landmark buildings in Europe, sports sponsorship and major new infrastructure projects such as solar power systems, Kuwait has been the sleepy cousin in a corner of the Arabian Peninsula.
Little new infrastructure including roads, ports and airport facilities has been built or renovated for years, while the nation is known for little more than oil and its war with Iraq.
And time is running out for Kuwait to make the most of its spoils. The International Monetary Fund warns that by as early as 2017, the country’s oil revenues will no longer out-weigh its spending, causing the first deficit since 1998. The IMF forecasts that in 2017-2018 Kuwait’s oil revenues will be about KD25bn ($87.9bn) compared to KD29bn in spending.
“Kuwait is at a crossroads for conserving wealth [for] the future,” IMF deputy division chief of the Middle East and Central Asia Department, Ananthakrishnan Prasad says. “Our estimates shows that government expenditure will exhaust all oil revenues by 2017, which means no portion of these oil revenues would be available for future generations.
“There has to be a shift in policy in Kuwait and Kuwait will have to start saving more and have to start reducing their spending.”
There is also the risk of an even earlier oil price shock or prolonged decline.
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