By Massoud Derhally
Lower oil prices and a decline interest rates have contributed to a 42 percent decline in Kuwait’s current account surplus in 2001, according to and economic brief by the National Bank of Kuwait. The emirate’s current account plunged to 2.63 billion dinars (US $ 8.7 billion).
Lower oil prices and a decline interest rates have contributed to a 42 percent decline in Kuwait’s current account surplus in 2001, according to and economic brief by the National Bank of Kuwait. The emirate’s current account plunged to 2.63 billion dinars (US $ 8.7 billion).“Oil export receipts fell by 18% on the back of a 17.2% decline in Kuwait export crude (KEC) and a 2.5% decrease in Kuwait’s official OPEC quota,” NBK said in its report. Though the latest figures indicate a 42% decline during 2001, the current account surplus remains high, and is the second largest since Kuwait was liberated in 1991. Oil exports for 2001, stood at 4.59 billion dinars (US $15.1 billion), characterised by NBK as being relatively high, even though they have declined from high levels in 2000. Government investments abroad were reportedly down 26% as a result of lower refining margins and interest rates. “Investment income, mainly earnings from government investments abroad and income from Kuwait Petroleum Corporation (KPC)'s international operations, stood at 1.52 billion dinars (five billion dollars),” the report said.Unlike most of the countries in the Gulf, Kuwait’s economic health depends a great deal more on oil revenue, which constitutes 90-92 percent of the government’s revenue. Saudi Arabia trails behind the small emirate, with oil constituting 70-80 of the government’s revenue, largely a function of the price of oil in a given year. Kuwait, which is a member of OPEC and has 10 percent of the world’s oil reserves, saw its production output cut back from 2.14 million barrels a day to 1.87 million at the end of 2001. Saudi Arabia exports 5.7 million barrels, Iran 2.5 million and the UAE 1.9 million.When asked how countries like Saudi Arabia and Kuwait will fare in the wake of fluctuating market conditions, a senior executive in the banking industry and a veteran of the oil industry in Saudi told ITP.net, “it’s the story of the century, before there is a bust there will be a boom.” “Saudi Arabia currently has 26 percent of the world’s oil reserves but it only produces 13% of global oil production. With time, those producing above their reserve levels will see their sources dwindle, who then, will make up that difference?”