Oil and Public Finance – March 2020

The current fiscal year 2019/2020 ended. As a reminder, expenditure allocations in the budget were estimated at KD 22.5 billion and total revenues estimates were at KD 15.812 billion with KD 13.863 billion as oil and gas revenues (87.7% of total revenues). Oil revenues were estimated based on the following assumptions: crude oil production quota at about 2.8 million barrels per day, estimated price of US$ 55 per barrel, approved exchange rate at 302 Fils per US$, gas revenues of about KD 259.4 million, and deducting production cost of about KD 3.418 billion. Non-oil revenues were estimated at KD 1.948 billion. Therefore, the hypothetical deficit anticipated for the budget scored about KD 6.688 billion without deducting the 10% from total revenues to the future generations reserve. However, what matters is the actual results in the final account.

The average price for Kuwaiti oil for the fiscal year 2019/2020, from April 2019 to March 2020 scored US$ 61.6 per barrel, which is US$ 6.6 per barrel or 12.1% higher than the hypothetical budget price at US$ 55 per barrel. The average oil price for fiscal year 2018/2019 scored US$ 68.5 per barrel. This means that the average price for the Kuwaiti oil in fiscal year 2019/2020 is lower by 10% than the average price for fiscal year 2018/2019.

Kuwait is supposed to have achieved actual oil revenues for fiscal year 2019/2020 about KD 15.194 billion, which is higher by 9.6% than value of estimated budget revenues (about KD 13.863 billion). Adding KD 1.948 billion in non-oil revenues, anticipated total revenues will score KD 17.142 billion for the entire fiscal year.

If that is achieved, and assuming spending all estimated expenditures in the budget in the amount of KD 22.5 billion, without deducting what is to be transferred to the future generations reserve as it is meaningless in case if a deficit is funded by the general reserve or by borrowing against the future generations reserve, the budget would score an actual deficit of KD 5.4 billion for the fiscal year 2019/2020.