Oil and Public Finance – August 2019

By the end of August 2019, the 5th month of the current fiscal year 2019/2020 ended and the average price for Kuwaiti oil for most August scored US$ 60.2 per barrel, higher by US$ 5.2 per barrel or 9.5% than the new hypothetical price estimated in the current budget at US$ 55 per barrel. It is also higher by US$ 10.2 than the average hypothetical price for the past fiscal year in the amount of US$ 50 per barrel. The average oil price for the Kuwaiti oil during the past fiscal year 2018/2019 scored US$ 68.5 per barrel. The average price for August is lower by 12.1% than the average price for the past fiscal year and lower by US$ 19.8 per barrel than the budget’s parity price at US$ 80 per barrel, according to the Ministry of Finance after deducting 10% to the future generations’ reserve.

Kuwait is supposed to have achieved actual oil revenues in August of about KD 1.3 billion. Assuming that production and prices would continue at the current levels -an unrealistic assumption- Kuwait’s oil revenues for the entire current fiscal year would score nearly KD 17.1 billion, after deducting production cost for the entire year. This is KD 2.6 billion higher than the  estimated for the current budget in the amount of KD 14.5 billion. Adding KD 1.9 billion in non-oil revenues, total budget revenues for the current fiscal year would score KD 19 billion.

Comparing this figure with the expenditures allocations in the amount of KD 22.5 billion, it would be likely that the public budget would score a deficit by KD 3.5 billion. However, five months are only good enough to be used as an indicator to the hypothetical deficit of the budget. The actual deficit will be a variable subject to the movement of oil prices and production levels during the remaining part of the year.