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. ********************************************* * 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/ ********************************************* * LEBARON