By Andrew White
The Gulf emirate has projected a deficit of around $22.2bn for the 2010-11 fiscal year.
Kuwait will still achieve a budget surplus in the current fiscal year, even if average oil prices dip below $70, according to a new study by National Bank of Kuwait (NBK).
The Gulf emirate has projected a deficit of around KD6.4bn ($22.2bn) for the 2010-11 fiscal year, which began in April. NBK said the government assumed a conservative oil price of $43 a barrel, according to the Emirates 24/7 website.
Oil prices have averaged above $60 so far this year, and are projected to rise later in the year and in 2011, as the global economic recovery gathers pace, the NBK report said.
To avoid prices escalating too far, OPEC might relax members' quotas, adding around 0.4 mbpd to its output by early 2011, the report said, according to Emirates 24/7.
"Under these conditions, the price of Kuwaiti crude could reach mid-$80 levels by the first quarter of 2011... These scenarios leave the price of Kuwaiti crude in the $67.3 to $79.9 range for this fiscal year. This is well above the $43 projection used by the government in its current budget," NBK said, according to the website.
"Under the government's projection, the fiscal deficit would reach KD6.4bn this year,” the bank continued. “In fact, if, as we assume, government spending comes in at 5-10 percent below budget levels, our oil price scenarios could generate a fiscal surplus of between KD0.9 billion and 5.7 billion this year, before allocations to the Reserve Fund for Future Generations.
“This comes despite an increase in budgeted spending of some 33 per cent this year, and would see the budget record its 12th consecutive annual surplus.”
However, according to the website, NBK's projections for Kuwait's fiscal surplus are lower than earlier forecasts, which put the surplus at around KD7.1bn.For all the latest Kuwait 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.