By the end of May 2020, the 2nd month of the current fiscal year 2020/2021 ended and the average price for Kuwaiti oil for May scored US$ 23.9 per barrel, lower by US$ 31.1 per barrel or 56.5% than the new hypothetical price estimated in the current budget and average hypothetical price for the past fiscal year at US$ 55 per barrel. The average oil price for the Kuwaiti oil during the past fiscal year 2019/2020 scored US$ 61.6 per barrel and the average price for May 2020 is lower by 61.2% or by US$ 37.7 per barrel than the average price for the past fiscal year. Also, it is lower by 72.2% or by US$ 62.1 per barrel than the new budget’s parity price at US$ 86 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 May by KD 344.6 million. Assuming that production and prices would continue at the current levels -an unrealistic assumption- Kuwait’s oil revenues for the entire fiscal year would score about KD 2.9 billion, after deducting production cost for the entire year. This is KD 10 billion lower than the estimated for the current budget in the amount of KD 12.9 billion. Adding KD 1.9 billion in non-oil revenues, total budget revenues for the current fiscal year would score KD 4.8 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 15.8 billion. But two months are good enough only to be used as an indicator to the hypothetical deficit of the budget, considering the negative effect of the current pandemic on oil prices. Actual deficit will be a variable subject to the movement of prices and oil production during the remaining part of the year, and we strongly not advise adopting the stated deficit number, and the continuation of oil prices at this low level is impossible, as this means that most conventional and unconventional oil will exit production because its cost is higher than this level of prices.