KUWAIT RAN OUT OF FUNDS DUE TO THE PANDEMIC

Being one of the wealthiest nations in the world, Kuwait is faced with an unusual situation. The pandemic and the ensuing rapid reduction in the cost of hydrocarbons led to a huge budget deficit in the country.

The revenues of the Government have declined so much that the country's leadership faced the need to cut spending. And here the traditional populism of the country's parliament came into conflict with the liquidity crisis and the inability of the executive branch to close the holes in the budget.

This fiscal year, which began in April, is expected to have a budget deficit of 14 billion dinars (equivalent to $ 46 billion).

At the same time, the long-standing loyalty of Kuwaiti residents to the authorities is being tested by the political crisis. The parliament (an elected body) opposes the head of government (appointed by the monarch). While the executive branch is trying to redistribute the governmental subsidies, the parliament continues to block such initiatives. A similar situation is developing with the issue of government debt securities.

Experts note that the most of Kuwait's budget revenues have been traditionally coming from the exports of oil and gas (about 90%). At the same time, the expenditure part is spent on the salaries and subsidies of persons (three quarters of the total budget) engaged in the public sector (about 80% of all employees).

The state treasury turned out to be practically devastated, given that the state employees of Kuwait got used to earning more than those who work in private business, relying on the subsidies and not denying themselves anything.

The "money box", which is here called the "fund for future generations» remains the only hope for the salvation of the country. The fund, created with an eye to the fact that someday oil will run out or cease to be an object of demand, has accumulated $ 550 billion.

Every year, 10% of the company's oil export revenues were transferred to this fund, enriching it by $ 12 billion. Last Wednesday, the country's parliament decided that it was necessary to stop replenishing the fund in conditions of deficit. Now it will be replenished only when the state budget is again in surplus, which has not happened for seven years in a row. A public debt law that allows the government to borrow up to 20 billion dinars ($ 65.4 billion) over 30 years has not been passed yet.

Experts note that the budgets of many Arab countries in the Middle East are facing the problem of growing deficits. Some of them decided to cut the benefits (Saudi Arabia), others are developing logistics and financial economic models (UAE). Against this background, “rich” Kuwait is an evident outsider.