Kuwait cut 2015/16 budget for the plunge in oil prices

Kuwait has cut spending in its 2015/16 budget by almost a fifth to account for the plunge in oil prices. The country’s development program won’t be affected, Finance Minister Anas Al-Saleh told reporters Monday in Kuwait City.

The budget deficit for the fiscal year starting April 1 will be 7.02 billion dinars ($23.8 billion), on projected outlays of 19.1 billion dinars, Al-Saleh said. A reduction in subsidies will help to bring spending down from the 23.2 billion dinars forecast for the current fiscal year, figures that were distributed showed.

Actual spending over the last three fiscal years has been about 19 billion dinars, Al-Saleh said.

Revenue is forecast at 12.052 billion dinars, with projected oil income of 10.6 billion dinars, accounting for 88 percent of total revenue, Al-Saleh said.

The new budget is based on an oil price of $45 a barrel at production of 2.7 million barrels a day. The break-even price required to balance the budget is $77, Al-Saleh said. Brent crude is selling around $48.50.

As oil prices fall, governments across the Gulf are cutting back on spending, including on subsidies. While oil revenue is down, “the draft budget was prepared in a way that serves the development plan,” Al-Saleh said.

That program, which involves large projects including a new oil refinery, requires investment of 6.61 billion dinars in the next fiscal year, according to Al-Saleh. By law, 10 percent of revenue is allocated to the Future Generations Fund. Non-oil revenue is projected at 1.45 billion dinars, Al-Saleh said.

Kuwait had a budget surplus every year for the 15 years through 2013/14, and another is projected for the fiscal year ending March 31.