Dubai — Kuwait on Jan. 25 unveiled a budget for its coming fiscal year with a breakeven crude price of $90/b and significant deficit spending, with higher expenditures eating up a significant portion of its projected increases in revenues.
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The budget, released by the finance ministry, expects crude production to average 2.4 million b/d for the year starting April 1, earning an average of $45/b. That compares to 2.5 million b/d at $30/b in the 2020-21 fiscal year.
Kuwait, which derives about 80% of its revenues from oil, the is currently bound by the OPEC+ supply accord with a quota of 2.329 million b/d through the end of the first quarter. The producer alliance has not yet decided on quotas beyond that but is expected to gradually increase the caps to capture growing demand as the global economy recovers from the pandemic.
The fiscal breakeven price represents what crude would have to average for Kuwait's spending to match its revenues.
In all, Kuwait, expects to earn 9.1 billion dinar ($30.1 billion) in the coming fiscal year from oil, up 62.2% on year.
Total revenue, including from non-oil sources, is projected at 19.9 billion dinar ($36.1 billion).
Government spending is targeted at 23.0 billion dinar ($76.1 billion), up 6.9% on year.
No large oil and gas projects are scheduled in the budget for the forthcoming year, the budget presentation states.
The deficit of 12.1 billion dinar ($40 billion) is down 13.8% on year, after a calamitous 2020 for all oil producers with the price crash in the spring.
Hydrocarbon production costs are projected to be 3.17 billion dinar ($10.5 billion), up from 2.93 billion dinar ($9.7 billion) in 2020-21.
"The state's budget is not immune to the global challenges brought on by the COVID-19 pandemic and lower oil prices. We are in a transitional phase that requires concerted efforts for economic recovery and growth," finance minister Khalifa Hamada said.
Oil-dependent Kuwait has been left particularly exposed to the price crash since it derives about 50% of GDP, more than 90% of exports, and about 90% of fiscal receipts from hydrocarbon products.
Kuwait's current crude production was 2.30 million b/d in December, according to the latest S&P Global Platts survey of OPEC+ output, largely in line with its quota.
"As OPEC+ oil production quotas ease this year, Kuwait's oil sector will begin to positively contribute to GDP growth in the middle of the year. But after last year's elections saw opposition candidates dominate the National Assembly, political infighting will persist and make it more difficult for Emir Sheikh Nawaf to pass reforms," a Jan. 22 research note from Capital Economics, a London-based consultancy stated.