Kuwait has approved a $76 billion state budget, with a clear emphasis on supporting employment across the country.
Kuwait’s Finance Minister Khalifa Hamade said 71.6 percent of expenditure is allocated for job support, with 15 percent earmarked for development projects, namely infrastructure and residential project.
To help increase spending on health care and education, $630 million has been put towards workers compensation.
According to a report from state news agency KUNA, the budget estimates a revenue of $36bn.
Hamade said the budget’s approval for the fiscal year, that began on April 1 and was supported by 32 of 63 lawmakers, was needed to keep development projects afloat.
Currently Kuwait is saddled with large debt and political deadlock that are blunting the ability of the country to invest money from its sovereign fund, ultimately stymying the country’s ability to diversify its economy away from oil – a key need of governments across the region.
The country’s budget deficit has widened to nearly 29 percent of GDP and is one of the largest globally.
Kuwait’s Finance Minister Khalifa Hamade
The $600bn Kuwait Investment Authority, the world’s oldest state investment vehicle, has been stuck in place since its board’s tenure expired two months ago and a new term is yet to be approved as political paralysis continues.
The government is also still debating a debt law that would cap borrowing at 60 percent of GDP. It hasn’t been able to borrow or issue bonds to finance its debt since the previous one expired in 2017.
“Kuwait’s stuck in limbo at the moment,” Scott Livermore, ICAEW economic advisor and chief economist at Oxford Economics, told Arabian Business.
The country has the financial wealth to pursue the agendas it has put forward, with Oxford Economics estimating savings at around 435 percent of gross domestic product marked for future use, but political issues remain.
Scott Livermore, ICAEW economic advisor and chief economist at Oxford Economics
Kuwait is currently trying to fill its public sector with citizens and is purging expatriate workers from government jobs.
All of this is limiting the country’s ability to diversify its economy, of which 50 percent is dependent on oil, and is lagging behind its neighbours’ trajectory in ability to navigate a post-oil economy.
“There’s reasons to expect growth to pick up. But we need to look beyond the short term horizon,” Livermore said. “You need all parts of government going in the right direction and have a consistent and holistic policy towards growth.”
The country’s central bank governor Dr Mohammad Y. Al-Hashel has said that the biggest imbalances in the country are the dominance of the government sector over economic activity, the employment imbalance of nationals, and climate change.
Governor of the Central Bank of Kuwait Dr. Mohammad Y. Al-Hashel
Kuwait has focused on increasing the number of nationals in the workforce, reducing the amount of required expat labour from 70 percent down to 30 percent. The expat population has declined 4 percent as the pandemic hit hiring activity in key sectors, especially construction, real estate, and manufacturing.
Kuwait’s economic future looks brighter, but the small oil-dependent country must boost its non-oil economy as oil production cuts by OPEC+ and the continued pandemic slow recovery, a new report from Oxford Economics found.
While non-oil GDP is gradually recovering, it is unlikely to return to pre-pandemic levels until 2022, but the sector is expected to account for the bulk of Kuwait’s anticipated 2.5 percent GDP growth this year, according to the group’s Economic Insight report, commissioned by ICAEW.
It said that in 2021, non-oil growth is expected to reach 3.1 percent, and by 2022 it should hit 4.7 percent.
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