Kuwait spending up 7pc in Feb
Kuwait, March 31, 2014
The Kuwait government's spending climbed to KD11.3 billion in February, up 7 per cent y/y on the back of higher transfers, according to a report.
The latter has driven growth in current expenditures, while capital spending has remained weak, said the report by the National Bank of Kuwait (NBK) citing the public finance figures for the first eleven months of FY2013/14.
As usual, the recorded spending should register a big jump in the final month of the fiscal year (i.e. March), partly as a result of reporting issues. Nevertheless, overall spending growth is projected to end up at a modest 4 per cent in FY2013/14, well down on last year, it stated.
According to NBK, the inter-governmental transfers continue to drive growth in current expenditures, which have more than offset large declines in the ‘goods & services’ component.
The current spending rose seven per cent y/y to KD10.4 billion in February, driven largely by a KD1.3 billion rise in transfer payments to the social security fund (PIFSS).
The latter has more than offset a 24 per cent y/y decline in spending on goods and services. This is mostly related to a drop in the cost of purchasing fuel from government refineries, as a result of lower oil prices, said the NBK in its report.
These inter-governmental transfers have limited significance for domestic demand, so the headline figures overstate the extent of the fiscal stimulus to the economy.
Excluding only the PIFSS transfers mentioned above, overall growth in government spending would actually fall by some 6 per cent y/y. The decline would likely be even larger once we exclude other non-demand impacting outlays, for which the entire data set is not available, it stated.
The Kuwaiti lender said while the annual decline in capital spending had subsided, the pace of spending remained weak.
The capital expenditures reached KD0.9 billion in February, unchanged in year-on-year terms. The rate of spending, however, at 36 per cent of the full-year budget is still weak by historical standards, it added.
NBK pointed out that the government revenues fell two per cent y/y to KD28.9 billion in February, as a result of lower oil revenues. The latter has declined on the back of a three per cent y/y fall in Kuwait crude export prices over the same period.
The drop in overall revenues has been softened slightly by higher non-oil revenues, which were up by a large 23 per cent y/y, possibly due to higher UNCC payments. Non-oil revenues still comprise only 7 per cent of total revenues, it stated.
"The combination of rising spending and softer oil revenues pushed the 11 month budget surplus down 6 per cent y/y. Nevertheless, at KD 17.6 billion, it remains extremely large. We expect the surplus to end up at around KD 11 billion, equivalent to an estimated 23 per cent of GDP, once the usual year-end jump in recorded spending is accounted for," it added.-TradeArabia News Service