Kuwait has 2 billion dinars ($6.6 billion) worth of liquidity in its Treasury and not enough cash to cover state salaries beyond October, Finance Minister Barak Al-Sheetan has warned parliament.
This is as political wrangling again delayed efforts to return to international bond markets.
The government is withdrawing from its General Reserve Fund at a rate of 1.7 billion dinars a month, meaning liquidity will soon be depleted if oil prices don’t improve and if Kuwait can’t borrow from local and international markets, he said.
Kuwait’s budget deficit increased 69 per cent to 5.64 billion dinars in the last fiscal year, and the government estimates it’ll more than double to 14 billion dinars in the current fiscal year, ending March 31, Al-Sheetan said. Wages and subsidies accounted for 76 per cent of all spending. The International Monetary Fund expects the government’s financial needs to grow at a rapid rate as its liquidity position weakens.
In March, S&P Global Ratings put Kuwait’s sovereign rating on negative watch, and Moody’s Investors Service followed. The IMF said that month that while Kuwait has large financial buffers and low debt, its “window of opportunity to tackle its challenges from the position of strength is narrowing.”
In June, Sheikh Sabah Al Ahmed Al Sabah, Kuwait’s ruler, issued a call to transform the economy to one less reliant on oil and urged rationalising spending. More than 90 per cent of the country’s revenue is generated from oil.
Other Gulf states facing similar predicaments have come to count more on borrowing, and S&P analysts say the region will borrow a record amount this year. Saudi Arabia, Bahrain and Qatar have all largely relied on debt to cover their deficits.
Kuwait’s net financial assets are set to continue dropping in coming years