Kuwait City recently announced that it achieved its first surplus in nine years for the fiscal year 2022-2023, ending in March. This remarkable achievement is largely attributed to the surge in oil prices experienced last year. As a nation heavily reliant on hydrocarbons, Kuwait witnessed a surplus of $21 billion in its fiscal balance, with over 92 percent of revenues derived from oil.
In a statement posted on its website, the Ministry of Finance declared, “The final account of the state’s financial administration records an actual surplus for the first time in nine years.” This surplus was made possible by the significant increase in oil revenues, which reached $87 billion for the fiscal year starting in April 2022, marking a 64 percent rise compared to the previous year.
The average price of a barrel of oil during this fiscal year stood at $97.1, reflecting a 21.4 percent increase from the previous year. Moreover, Kuwait’s daily oil output reached 2.7 million barrels. However, it is anticipated that revenues for the current fiscal year will decline due to the decrease in oil prices, with the draft budget for 2023-2024 based on a projected price of $70 per barrel.
Regrettably, the 2023-2024 draft budget predicts a growing deficit, with total revenues expected to plummet to approximately $63.8 billion. Despite this setback, Kuwait benefits from being home to around seven percent of the world’s crude reserves, situating it favorably in the global oil market. Additionally, Kuwait boasts an incredibly strong sovereign wealth fund and has managed to maintain minimal debt.
Nonetheless, Kuwait is no stranger to political instability, which has hampered its economic progress. The country has experienced consistent stand-offs between elected lawmakers and governments appointed by the ruling family. Despite the parliamentary system in place since 1962, the ruling family continues to retain a dominant role in Kuwait’s political landscape. This constant upheaval has created uncertainty among investors and inhibited necessary economic reforms.
Over the past decade, Kuwait has held seven general elections, highlighting the persistent challenges in achieving a stable government. Last month, Kuwait saw its fifth government take the oath of office in less than a year following the latest election, which resulted in an opposition-controlled parliament. It is hoped that this new government can provide the stability needed to drive economic reforms and attract foreign investment.
In conclusion, Kuwait’s achievement of a surplus for the 2022-2023 fiscal year is an important milestone for the nation after years of deficits. This success can be attributed to the surge in oil prices and the significant proportion of revenues derived from the oil sector. However, the country continues to face challenges due to political instability, which has hindered economic progress and deterred potential investors. With the appointment of the most recent government, there is renewed hope for the implementation of necessary reforms to foster economic growth and enhance Kuwait’s position in the global market.