Kuwait's budget surplus shrank 21 per cent to KD5.7 billion ($19.8 billion) during the fiscal year 2006/07 compared to the previous year, after the allocation of 10 per cent of revenues to the Reserve Fund for Future Generations (RFFG).

According to the preliminary budget figures released by the Ministry of Finance the surplus was buoyed by the 12.8 per cent increase in revenues, which rose to KD15.5 billion on the back of still higher oil prices, but it was held down by 60 per cent growth in expenditures.

The actual budget surplus is expected to come in between KD4.8–5.1 billion after closing account adjustments are made, said a National Bank of Kuwait report.

Final spending should fall between 94 per cent and 96 per cent of the projected figure, after significant upward adjustments due to delayed reporting, it said.

NBK states that extraordinary items provided a substantial boost to expenditures in FY06/07, accounting for an estimated two-thirds of the growth in spending overall. The items, which include one-time transfers to the Public Institution for Social Security (PIFSS) and an Amiri grant to nationals, alone lifted total expenditures by nearly KD2 billion. However, even when these items are excluded, expenditures still show solid growth of 24 per cent, compared to 8.5 per cent registered the previous year.

With oil prices continuing to strengthen, oil revenues maintained their rapid growth, although the pace was tempered by easing oil prices during the second half of 2006. Oil revenues rose to KD14.51 billion as the price of Kuwait export crude (KEC) averaged $57.6 per barrel during FY06/07, 12 per cent higher than the same period the prior year. Kuwait’s crude oil production was mostly unchanged, averaging 2.48 million barrels per day (mbd).

The NBK report cited that non-oil revenues witnessed significant growth topping 26 per cent to reach KD948 million during the 12 months, though this figure is still subject to revisions as year-end adjustments are made. Notably, the ratio of non-oil revenues to total revenues rose for the first time in five years. With the exception of income from service charges, all income sources exceeded budget projections, though the former’s shortfall was relatively small.

The bulk of the growth in non-oil revenues came from miscellaneous revenues and fees which were up KD156 million and accounted for 80 per cent of the total increase. Revenues from income and profit taxes also saw strong growth, with tax receipts from KSE-listed corporations and from foreign companies up 39 per cent and 30 per cent, respectively. Income was provided an additional boost by customs fees and taxes which grew 7 per cent. In contrast, land sales were down 18 per cent following last year’s 61 per cent drop.-TradeArabia News Service