Kuwait has cut subsidies and plans to introduce value-added taxation to plug a budget shortfall triggered by lower crude prices and production
Kuwait will need $100 billion of additional financing over the next five years as mandated contributions to its Future Generations Fund leave a fiscal deficit, according to the International Monetary Fund.
Contributions to the fund, excluding investment income, will mean an annual deficit of about 15 percent of gross domestic product, the IMF said in a statement concluding its 2017 Article IV consultation. Excluding FGF contributions and income, the lender expects Kuwait’s overall budget to remain “nearly balanced” through 2019, assuming a baseline oil price of $49 a barrel.
Kuwait has cut subsidies and plans to introduce value-added taxation to plug a budget shortfall triggered by lower crude prices and production. It tapped international debt markets for the first time - raising $8 billion in March - and is also considering raising the debt ceiling, introducing an annual spending cap and changing the law to allow the sale of 30-year bonds.
The IMF expects Kuwait’s economy to contract 2.5 percent this year, driven by a 6 percent reduction in oil production as part of an OPEC agreement aimed at tackling a global glut. Non-oil economic growth is expected to be 2.5 percent this year on higher confidence, according to the fund.
Kuwait’s additional financing needs “will continue to be met through a limited amount of domestic borrowing, external borrowing, and drawdown” of assets in its General Reserve Fund, the IMF said in the statement.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.