KUWAIT UNVEILS 2007-2008 BUDGET

UNCLAS KUWAIT 000098

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR NEA/ARP, EB

E.O. 12958: N/A
TAGS: ECON PGOV KU
SUBJECT: KUWAIT UNVEILS 2007-2008 BUDGET



1. (U) On January 21, Kuwait's Council of Ministers approved
a KD 10.45 billion ($35.78 billion) budget for the 2007-2008
fiscal year beginning April 1. Revenue, estimated at KD 8.32
billion ($28.88 billion),down slightly from KD 8.52 billion
($29.58 billion) in the 2006-2007 budget, would fall short of
expenditure projections and result in a KD 2.96 billion
($10.13 billion) deficit. However, the budget calculates oil
revenues, which constitute the overwhelming majority of the
GOK's income, at $26 per barrel, which is significantly lower
than the market price of Kuwaiti export crude, which has
averaged nearly $58 per barrel over the last year. As in
previous years, low-balling the price of oil in the 2007-2008
budget will result in a massive budget surplus, which for the
2006-2007 fiscal year was more than KD 5.8 billion ($20
billion). The budget also provides for 10 percent of
revenues to be set aside as part of Kuwait's Fund for Future
Generations, a fund intended to sustain the country after its
oil resources have been exhausted. The fund is managed by
the Kuwait Investment Authority.


2. (U) In public comments, Finance Minister Bader
Al-Humaidhi said the GOK plans to improve education and
health services, which are provided free to Kuwaiti citizens
and at minimal cost to Kuwait's large expatriate population.


3. (SBU) Commenting to visiting Treasury U/S Adams on
January 23, Minister Al-Humaidhi said he envisioned that
parliament would have no difficulty passing the budget. He
said projected expenditures are the highest of any budget in
Kuwait's history. He hoped parliament would work with the
government on identifying worthy projects to fund. He said
that 20% of expenditures would go toward investment,
particularly on infrastructure in the power sector, to avoid
the power cuts of the previous summer. Another 25% would go
toward salaries and wages, both to increase them and in order
to absorb Kuwaiti graduates into the job market, a
requirement of the Kuwaiti constitution. He noted that in
order to have a balanced budget, oil prices needed to average
$45 a barrel during the upcoming fiscal year.

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For more reporting from Embassy Kuwait, visit:
http://www.state.sgov.gov/p/nea/kuwait/?cable s
Visit Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
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LEBARON