Kuwait City (AsiaNews/Agencies) – Kuwait’s ruler said that the oil-rich emirate must find alternative revenue sources and reduce public expenditure after state income dropped due to the recent drop in crude prices.
Addressing parliament at the beginning of its new term, Sheikh Sabah al-Ahmad Al-Sabah urged the legislators and Kuwaitis to understand the new measures.
“The decline in global oil prices has caused state revenues to drop by around 60 per cent,” the emir said. By contrast, spending did not change, “leading to a huge deficit”.
This requires “speedy actions to adopt serious and fair measures to complete economic reforms . . . and reduce public expenditures.” And “Any delay would only increase the budget deficit and make the cost (of reforms) higher”.
Oil prices plunged by 60 per cent since June 2014, hitting the coffers of energy-dependent countries like Kuwait. For the past 16 years, oil revenues accounted for about 94 per cent of the emirate’s budget.
Over the years, the emirate posted large budget surpluses and piled up massive fiscal reserves of around US$ 600 billion. The reserves are invested mostly abroad by the country’s sovereign wealth fund.
The International Monetary Fund said in a report last week that under existing conditions, the reserves would be enough to last Kuwait for the next 23 years.
Still, Sheikh Sabah said the government should avoid tapping the sovereign fund to finance the budget shortfall.