KUWAIT CITY, (AFP) — Kuwait’s parliament on Wednesday passed a deficit budget for the 2011-2012 fiscal year projecting the highest spending in the OPEC member’s history amid warnings the country’s future is at risk.
Thirty-nine MPs voted for the budget while 20 were opposed.
Spending is projected at 19.44 billion dinars ($70.7 billion), an 11-percent rise from the previous budget, mostly to meet a string of pay hikes and grants for Kuwaitis, lawmakers said.
The previous largest spending was 18.7 billion dinars in 2008-2009 when oil prices hit an all-time record above $147 a barrel. That budget included a one-off payment of 5.5 billion dinars for the pension agency.
Revenues are estimated at 13.45 billion dinars, more than 90 percent from oil, a sharp 38 percent increase from last fiscal year after raising the oil price in the budget from $43 to $60 dollars a barrel.
That leaves a deficit of 6.0 billion dinars, but the oil-rich emirate projected a deficit in the past 12 fiscal years and ended up in surplus mainly for underestimating oil income.
During that period, Kuwait has accumulated about $200 billion in budget surpluses and is also expected to end up the current year in the black if oil prices remain high.
Kuwait’s fiscal year starts on April 1 and ends on March 31.
But MPs issued a stern warning to the government that spending, which has more that tripled in the past six years, must be curtailed otherwise the country risks withdrawing from assets to pay wages.
Head of the parliamentary budgets committee MP Adnan Abdulsamad described the budget as “crazy” and said the price for oil needed to balance the budget is $85-90 a barrel.
“Ten years ago, we needed oil price to be at $18 a barrel to balance the budget, but now if oil slips below $85-90, we will be forced to withdraw from the assets to pay for wages,” Abdulsamad told parliament.
The price of Kuwaiti oil dropped below $100 dollars on Tuesday.
MP Adel al-Saraawi, a member of the budgets panel, said 90 percent of the budget is allocated for subsidies, especially power, and wages.
Kuwait adopts a cradle-to-grave welfare policy where a majority of citizens are employed by the government, receive handsome salaries, pay no taxes and receive services at low charges or free.
Liberal MP Abdulrahman al-Anjari said the country still almost totally depends on oil income.
“The title of this budget is ‘a nation at risk’… the sharp increase in spending is very alarming,” he said.
“The government says it wants to transform Kuwait into a trade and financial hub. This is the biggest joke I have ever heard.”
State Minister for Cabinet Affairs Ali al-Rashed said the blame for high spending should be shared by the government and MPs who have passed populist legislation to raise salaries and benefits.
Under Kuwaiti law, 10 percent of revenues are deducted every year in favour of the emirate’s sovereign wealth fund, the assets of which are estimated at about $300 billion.
Returns on the fund are not included in the budget.
Kuwait says it holds 10 percent of global crude reserves and is pumping about 2.6 million barrels per day.