Kuwait’s budget for fiscal year 2017-18 has been prepared on the assumption of a gradual return of normality to the oil markets.

Kuwait stands out for allocating a portion of its oil revenues for the next generation, a fact contributing to the higher than forecasted budgetary deficit. By one account, the equilibrium point of expenditures and revenues requires an average oil price of $71 per barrel, something not attainable in the current circumstances.

The budget assumes an average $45 per barrel as opposed to $35 in the previous one. Oil prices have hovered around $50 since Opec’s agreement late last year to limit production. Kuwait produces an average of 2.8 million barrels per day. (Kuwait’s fiscal year runs from April to March, the sole Gulf state who doesn’t operate one on a straight calendar year.) Projected expenditure and revenues for fiscal year 2017-18 stand at $65.2 billion and $43.6 billion, respectively. Expenditures are up by 5 per cent while total revenues are up by 30 per cent on the back of stronger oil income. The data suggests a budgetary deficit of $21.6 billion.

Notably, the gap is 25 per cent below that assumed for fiscal year 2016-17 which ends in March. A primary change concerns the assumption of stronger revenues, projected at $38.4 billion, up by nearly 36 per cent from the earlier budget exercise.

This marks the third year in a row of a deficit. Until then, Kuwait had developed a habit of recording surpluses for 15 consecutive years. This was made possible via under-estimating revenues and overestimating expenditures, in turn supported by relatively strong oil prices, a luxury no longer available.

The economy is heavily dependent on the petroleum sector for its well-being. Collectively oil and gas revenues account for 88 per cent of the total projected.

Higher expenditures should help the authorities meet some goals related to the New Kuwait strategy. The plan initiatives call for a diversified economy, advanced infrastructure, quality health care, creative manpower resourcing, a sustainable living environment, and distinguished international status.

The schemes revolve around expanding capacity at Kuwait International Airport as well as further expanding the road network. The expansion at the former is vital to help the airport and Kuwait Airways meet the competitive challenges posed by other regional hubs like Dubai and Doha as well as airlines such as Emirates, Qatar Airways and Etihad.

It is hoped that the New Kuwait strategy would help the country improving its rankings in global development indexes. Kuwait ranked 75th in the 2016 Corruption Perceptions Index — the worst performance for any GCC state. By comparison, the UAE ranks 24th. The index looks into possible corruptive business practices in government dealings, in turn important in attracting international investors.

Likewise, Kuwait is the worst regional performer in the Doing Business 2017 report by the World Bank. It is at the 102nd spot versus 26th for the UAE. The economies are ranked on variables such as power availability, ease of registering property, obtaining credit, and protecting investors.

As Kuwait celebrates the anniversary of its 1991 liberation, it is hoped that the New Kuwait strategy would help reverse course by enhancing the country’s standing.

The writer is a Member of Parliament in Bahrain.