By Massoud Derhally
In its latest economic brief on public finance, NBK reported on the closing accounts for the Kuwaiti government’s budget in fiscal year 2001/02 that show a surplus of KD 590 million before the allocation for the Reserve Fund for Future Generations and KD 57 million after RFFG.
In its latest economic brief on public finance, National Bank of Kuwait reports on the closing accounts for the government’s budget in fiscal year 2001/02 (FY01/02) that show a government surplus of KD 590 million before the allocation for the Reserve Fund for Future Generations (RFFG) and KD 57 million after RFFG. This result comes slightly better than previous NBK projections, and certainly much better than had been forecast in the government’s budget projections which, due to a conservative oil price assumption, expected a substantial government deficit of KD 1.44 billion.Nonetheless, the surplus was substantially lower than that seen in FY00/01 (annualised) and about half of the figure achieved in FY99/00. This was in part due to an 18% decline in the price of oil, which averaged $20.7 during FY01/02 as compared to $25.1 in FY00/01, as well as a 9% reduction in Kuwait’s level of crude oil production in accordance with its OPEC quota.On the other hand, the government’s non-oil revenues surged by 39% in FY01/02 to reach KD 812 million. While the bulk of this increase was from UN Compensations Committee (UNCC) payments, excluding them still sees non-oil revenue growth at a substantial 13%. About half of the increase unrelated to the UNCC payments came from higher service revenues which were up 11% in FY01/02 to KD 329 million, following two years of strong growth (13% and 10%). Some of the rest came from increased revenues from import duties, which were up 10%, while most of the remaining growth was in non-cash revenues.The strong growth seen in service revenues was driven in part by higher revenues from the health insurance scheme put in place in 2000. Revenues from this program reached KD 34 million in FY01/02 increasing by 42% from the prior year when the program was first introduced. Another main source of growth were revenues from electricity and water charges, which grew by 20% following a year when revenues actually declined by 35%. Other sources of service revenue growth included higher property rental revenues, which increased by 41% adding KD 6 million, and increased income from judicial fees and charges, which grew by 38%.Nearly three-quarters of the increase in non-oil revenues came from UNCC payments paid directly to government ministries and departments for damages incurred as a result of the Iraqi invasion and occupation, according to NBK.