Kuwait's top policymakers have stressed the need this summer to correct imbalances in the oil-reliant economy and axe budget waste, which analysts said signalled a resolve to push ahead with long-delayed diversification plans as global recession looms.
Asked whether he expected budget cuts Mustapha Al-Shamali said: “No, no budget cutting but for the future we have to realize things we have to do, for instance no raises in budget expenditure ... investment side of the budget.”
“It (this year’s budget spending) will be the top because we put some expenditure in this budget and it won’t be put in again,” he said on the sidelines of Arab finance ministers’ meeting in the UAE.
Kuwait said in August that a misuse of budget surpluses and “irresponsible consumer waste” have deepened structural imbalances and distortions in the economy, which needed correcting, echoing remarks by the central bank governor.
Since 2004, Kuwait’s budget spending has tripled to a record 19.4 billion dinars ($71 billion) planned for the 2011/12 fiscal year, which started in April, with expenditure on wages rising almost as fast.
The world’s No. 6 oil exporter has also boosted social spending this year, including cash grants and free food rations for its citizens, mirroring a trend seen in much of the Gulf as unrest swept through the Arab world.
The country plans to spend 4 billion dinars this fiscal year out of its four-year development plan, Al-Shamali said.
Kuwait’s parliament cleared a $110 billion development plan in February 2010, aiming at diversifying away from oil and boosting the private sector, but progress has been slow so far.
Al-Shamali also said the current oil price was "okay" for the Gulf Arab state and that it was always seeking a reasonable price for itself and crude importers.
“The price is now okay for us and even importers,” he said.
Kuwait depends on crude income for around 93 percent of its budget, making it the most oil-dependent state in the Gulf.
Brent crude prices hovered above $113 per barrel on Wednesday, while the US benchmark moved around $87 per barrel.
