Kuwait’s parliament will hold an extraordinary session later this week to review the country’s finances, as it tackles the twin challenges of sharply lower oil prices and the Covid-19 pandemic.
Parliament speaker Marzouq al-Ghanem called for a 13 May session late yesterday “to examine a number of crucial financial issues, namely the budget.”
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Kuwait’s economy is heavily dependent on hydrocarbons, making it particularly susceptible to the downturn in oil prices.
Al-Ghanem did not say if parliament will vote on any new measures aimed at supporting the economy, but his call came just one day after Kuwait’s emir warned that that decline in oil prices and value of investments and assets since the start of the coronavirus pandemic will have an adverse impact on Kuwait’s “financial solvency.” Sheikh Sabah al-Ahmad al-Jaber al-Sabah said he had directed a review of Kuwait’s finances in an effort to “rationalize the use of our resources” and to reduce the economy’s dependence on “one depleted resource” — oil.
Kuwait’s budget for the current fiscal year, which began on 1 April, forecast oil and gas revenues of 12.9bn Kuwaiti dinar ($42.41bn), or 87pc of overall revenues. But that was based on a crude price of $55/bl, almost double the current level, and average crude production of 2.7mn b/d.
Under the Opec+ agreement that was struck last month, Kuwait committed to cap its production at 2.17mn b/d in May and June; at 2.3mn b/d in the second half of the year; and at 2.43mn b/d from January 2021 until April 2022.
Kuwait had projected a deficit of KD9.2bn for this year, around 12pc larger than the KD8.2bn deficit projected in the previous year’s budget. The actual deficit will almost certainly be considerably wider this year given the changed circumstances.
Ratings agency Moody’s in March placed Kuwait’s Aa2 long-term issues rating on review for a downgrade, citing a “significant decline in oil prices, combined with weak governance that could have very significant implications for Kuwait’s capacity to finance its borrowing needs in the next few years.”
Kuwait is under full lockdown until the end of this month, as the authorities scrambles to contain the spread of Covid-19. New cases of infection have risen markedly in recent days — the ministry of health today reported 598 in the past 24 hours, the third-highest daily increase, albeit down from the record high 1,065 reported yesterday. Kuwait now has 9,286 cases, up from 5,278 just a week ago.
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