To complete the previous two warnings by IMF and S&P’s Agency about the depletion of the ‘financial reserves” of the Gulf countries and the potential for downgrading their banks’ credit ratings, it is necessary to review some history of the correlation of public expenditures and oil prices. In the absence of serious thinking about the future of the State of Kuwait, the history of that relationship narrates how the inflexible and harmful public expenditures get loose whenever the oil prices which finance about 90% of them and they continue to rise even when oil prices fall.
In the Fiscal Year 2002/2003 the average price of Kuwaiti oil barrel scored US$ 25.8, and public expenditures according to the final account for the same fiscal year was at KD 4.93 billion. In the FY 2018/2019, the average Kuwaiti oil barrel scored US$ 68.5, and public expenditures according to the closing account amounted to about KD 21.85 billion. These figures mean that oil prices between FY 2002/2003 and FY 2018/2019 rose by nearly 2.7 times while public expenditures increased between the two fiscal years by 4.4 times.
That risky approach is more evident when we compare the movement of oil prices with the movement of public expenditures between FY 2011/2012 and FY 2018/2019. In the 2011/2012 fiscal year, the price of Kuwaiti oil barrel was about US$ 109.9 and actual public expenditures scored about KD 17 billion. In the fiscal year 2018-2019, the price of a Kuwaiti oil barrel, as we mentioned, was at US$ 68.5, and the actual public expenditures for the same fiscal year amounted to KD 21.85 billion. This means that the price of Kuwaiti oil barrel between the two previously mentioned fiscal years lost about 37.7% of its level while public expenditures for the same period rose by about 29%.
Back to the conclusion of the two stated reports above which say that oil prices in the medium to long term will decline. It suffices to indicate that they decreased by 37.7% in 8 years, during which all financial reform policies failed. With an estimated deficit of KD 6.7 billion for the current fiscal year 2019/2020, and forwarding the accumulation of deficits to the future with the inevitability of rising non-feasible public expenditures and decrease in oil prices with high production costs and perhaps a reduction in production to support prices, the results cannot be but as mentioned in the two reports.
Lately, after assuming it was a warning message to the two reports about the future of the fiscal deficit and after the general reserve liquidity’s depletion, a sabotage campaign to the balance of the Public Institution of Social Security began with the approval of populist laws that affect it in their first deliberations so that the forthcoming danger will not be confined to the young generations joining the labor market but will affect the retiree’s safety. The government is completely unable to protect the future of both groups.