KUWAIT: Finance Minister Dr Anwar Al-Mudhaf said the government will not cut wages of government employees despite persistent budget deficits, but warned the government may use assets to finance the shortfalls. “The pockets of the people will not be touched,” he said, in reference to wages. About 80 percent of Kuwaiti manpower of 450,000 is employed by the government and its establishments.

In an interview on state-run Kuwait Television broadcast Wednesday night, the minister however said the government will reform subsidies, which eat up more than KD 4 billion in spending, by directing the subsidies to only those who need it. Kuwait has accumulated KD 33 billion in net budget deficits over the past 10 years as prices of oil, which provide around 90 percent of public revenues, crashed, and Kuwait had to comply with OPEC production cuts to support sagging prices.

The finance ministry is estimating total deficits over the next four fiscal years at KD 26 billion, said Mudhaf, adding the government could be forced to use its assets to finance the deficits if fiscal reforms were not applied. “Fiscal reforms are coming,” said the minister, adding the ministry has worked out nine initiatives on fiscal reforms to achieve “sustainable finances”.

The minister said the Cabinet in its meeting this week approved the state budget for 2024/2025 fiscal year which started on April 1, projecting a deficit of KD 5.6 billion. Revenues are estimated at KD 18.9 billion, a drop of 2.8 percent from the previous fiscal year, while spending is projected at KD 24.5 billion, down 6.6 percent on the previous year’s projections. Oil revenues are projected at 85.8 percent, lower than normal, while non-oil income is estimated at 14.2 percent, higher than previous years. But this could change depending on the developments in international oil prices.

Kuwait has posted a surplus in two fiscal years since 2014/2015, when oil prices began falling. The first surplus was in 2014/2015, while the second was in 2022/2023, when it posted an actual surplus of KD 6.5 billion. In the 2022/2023 fiscal year, actual revenues were KD 28.8 billion while spending was at KD 22.3 billion. Most of the revenues came from oil income when oil prices averaged $97 a barrel throughout the fiscal year.

Wages and subsidies are estimated to account for more than 78 percent of spending, according to the budget figures, with subsidies amounting to over KD 4 billion. The minister said the distribution of subsidies is unfair, as all benefit from it including big companies and the rich, and this has to change.