Kuwait Eyes Short Term $17bn Debt Market Boost; Longer-Term Reform Is Needed

Kuwait will borrow $17bn to ease its expected 2016-17 deficit. Overly cautious oil price estimates mean an additional reserves draw-down may not be needed.

Kuwait is set to run a third consecutive budget deficit for the year beginning 1 April with the 2016-17 deficit slated to be almost twice that of the previous year.

The government plans to raise debt on international and domestic markets to cover part of the deficit whilst plugging the remainder through drawing down its reserves. But these are inherently short term measures and with oil prices likely to remain well below the $65-70/B necessary to balance the budget, structural reforms are necessary.

Failed efforts to cut the 15% of spending allocated to subsidies – despite successful reforms by other GCC states (MEES, 4 March) underline the extent of the difficulties Kuwait faces in passing financial reforms through its truculent parliament. And with elections due by July 2017, MPs will be especially wary of supporting measures that could hit citizens in the pocket when they return from summer recess in October. (CONTINUED - 980 WORDS)