An Unprecedented Challenge
Kuwait is currently facing an exceptional and serious challenge, according to the government's new work program. The country heavily relies on oil as its main source of income, and the fluctuation of oil prices poses a significant threat to its public finances.
The Consequences
This challenge not only jeopardizes the ability to provide a decent life for citizens and meet their basic needs but also puts Kuwait at risk of failing to fulfill its local and international obligations.
Diversifying the Economy
Kuwait, which currently relies on oil revenues to finance 90% of its general budget, recognizes the need to reduce its dependence on oil. The government is actively seeking to diversify its economy and find alternative sources of financing.
Past Efforts and Future Plans
Previous attempts to diversify the economy have not been very successful, unlike some other Gulf countries that have achieved varying degrees of success. However, Kuwait remains determined to find a solution.
The Expected Deficit
Without implementing economic and financial reforms, the state's general budget is projected to face a deficit ranging between 45 and 60 billion dinars ($146.13 to 194.84 billion) over the next five years. Additionally, government financing requirements are expected to double in the next decade, with an estimated public budget deficit of 13 billion dinars ($42.23 billion) in 2033.
The Importance of Oil Prices
According to the government's program, financing the general budget would require high oil prices of $100 per barrel. If the financial and economic conditions continue to deteriorate, it could lead to individuals, companies, and banks struggling, unemployment rates rising significantly, social services collapsing, and social security deteriorating.
Government Initiatives
To address these challenges, the government plans to pass laws related to liquidity tools, business profits tax, and selective tax during the current legislative term. Additionally, a feasibility study for a railway link project with Saudi Arabia will be initiated within the next 100 days.
Source: Reuters
