KUWAIT, (Reuters) – The weak U.S. dollar is not a concern for Gulf economies and Kuwait is likely to increase spending in its budget for the next 2011/12 fiscal year, the OPEC country’s finance minister said on Saturday.
The dollar’s slide has caused concern among oil producers as it pushes down the value of their dollar-denominated oil revenues while the price of their commodity imports, such as grains, have been increasing.
However, when asked whether there was any concern about the impact of the weak dollar on Gulf Arab economies, Kuwait Finance Minister Mustapha al-Shamali said: “No.”
The dollar hit an 11-month low against a basket of currencies .DXY earlier this week.
Kuwait, unlike its fellow Gulf oil producers, abandoned its currency peg to the dollar in 2007 in favor of a currency basket to rein in then soaring inflation, which is on the rise again.
A weak dollar also tends to lift oil prices as money shifts from the currency market to commodities in search of better returns.
Shamali also told reporters on the sidelines of a meeting of Gulf finance ministers and central bank governors in Kuwait that the Kuwait government’s expenditure would rise in the next fiscal year’s budget.
“There is some increase in the budget but we are discussing it,” he said.
The world’s fourth-largest oil exporter ramped up spending by more than 34 percent in its current budget for 2010/11, which began in April, partly to diversify its crude-reliant economy and increase the role of the private sector.
The OPEC member’s 2010/11 budget forecast a deficit of 6.58 billion dinars or nearly 21 percent of gross domestic product, assuming crude, the key revenue earner, would fetch $43 a barrel.
Benchmark U.S. crude ended at $86.85 a barrel on Friday.
Analysts say Kuwait is set to post the biggest surplus in the Gulf of 18.9 percent of GDP in 2010/11 because of an oil price estimate well below market prices.
Kuwait’s budget surplus rose to 5.43 billion dinars in the first six months of the fiscal year ending next March.