Kuwait’s freshly-released 2019-20 budget (beginning 1 April) fails to tackle the GCC economy’s key structural weaknesses, that much is clear from the IMF’s 28 January post-mission statement.
As with other Gulf monarchies, Kuwait has talked a good game on the need to diversify its economy and increase the role of the private sector. But, as the IMF makes clear, achieving this necessitates reducing the relative attractiveness of public sector employment. Kuwait’s finances improved considerably in 2017 and 2018 on the back of higher oil prices: the country is on track to record the first budget surplus in five years for the ongoing fiscal year, ending 31 March. But the strength of this correlation between oil prices and economic performance in itself “underscores the need to reduce Kuwait’s dependence on oil.” In the absence of serious attempts to reform the economy, the recent slump in prices is set to see Kuwait swing into a record budget deficit for 2019-20 (see table and MEES, 25 January). (CONTINUED - 811 WORDS)