Final Account FY 2018/2019

On July 28, 2019 the Minister of Finance presented a press release reviewing gross figures for the final account of the fiscal year 2018/2019. Figures unfortunately suggest continued correlation between revenues, most of which are uncontrollable by us, and public expenditures which has continued for 5 years as the title of reform policies without any reform. The briefing states that total realized revenues scored KD 20.558 billion, 89.6% of which are oil revenues up from KD 16 billion in the past fiscal year, i.e. an increase by 28.5%. The actual expenditures scored KD 21.849 billion, up from KD 19.247 billion in the past fiscal year and an increase of 13.5%, i.e. relative increase by 3 times the actual expenditure estimated in the previous budget. The actual expenses increase from the final account between the fiscal year 2016/2017 and 2017/2018 was 8.7%.

In details, public expenditures is increasing constantly, while expectations are almost unanimous on decline in public revenues for the current fiscal year and in the future due to pressures to lower production and oil prices. The quality of public spending is deteriorating. Public spending which exceeded budget estimates  at the beginning of its approval -before any additional allocations-   by   about   KD  349  million  -which is a precedence- with the share of current expenditures increasing from 83.2% in the previous fiscal year to 86.1%. The share of capital expenditures has declined in absolute terms. Salaries item, similar items and subsidies rose to an unprecedented level of KD 16.334 billion or about 88.6% of total actual oil revenues in a good year for the oil market and 79.5% of total public revenues. While the absolute increase in non-oil revenues could be considered at KD 2.130 billion from KD 1.717 billion in the fiscal year 2017/2018, about 68.3% of which are under other revenues, i.e. undefined, due either to their dispersion, i.e. have no main source, or due to their weak classification, which is an accounting flaw. The decline in the account of trusts or their balance by 29.5% is a good thing, but their level after the reduction is still around KD 4.23 billion, which is a big figure and is equivalent to about 19.4% of the total inflated budget. Trusts are a problem created from nothing due to the uncontrolled fiscal policy and its accounting system.

The actual deficit estimate doesn’t relate to reality. The budget deficit amounted to KD 3.346 billion after deducting the transferred amount to the reserve of the future generations, which is meaningless. What is transferred for the future generations reserve is deducted from the general reserve and drops to KD 1.291 billion before the deduction, which is correct from an accounting point of view, while deficit scientifically is much higher as long as the funding source of expenditure is unsustainable revenues.

The conclusion of the final account analysis is conclusive that the announced financial and economic reform policies are irrelevant to reality. Even what is classified as investment spending is not considered as investment spending, as long as it is not related to creating national and sustainable employment opportunities.