Kuwait's parliament approved on Wednesday a $56 billion state budget for 2010/11 which increases spending by 67.2 per cent from the previous fiscal year as the Gulf country aims to reduce its dependence on oil.

The new budget projects a deficit of KD7.55 billion ($25.97 billion) with expenditure set at KD16.3 billion ($56.07 billion), up from the 9.75 billion dinars the Opec member spent in the 2009/10 fiscal year.

But analysts say the budget will in the end register the biggest surplus in the Gulf because the government has assumed a very conservative price of $43 a barrel for oil in its calculations - well below current market rates that are not expected to waver heavily.

The world's fourth largest oil exporter plans revenues for the fiscal year that started in April at 9.72 billion dinars. For comparison, it initially planned last year's revenue at 8.08 billion compared with the actually collected 17.92 billion.

The new budget includes spending on a four-year, 30 billion dinar development plan, which is aimed at diversifying the crude-reliant economy and increasing the role of the private sector.

Some lawmakers had criticised the government for its conservative oil price estimate, but the government said in a budget report obtained by Reuters that it was a 'precautionary' measure for any drop in prices. Benchmark US crude traded around $76 a barrel on Wednesday.

The new budget was approved by 39 members of parliament, 21 voted against, one abstained. The law now needs to be signed by the country's ruler.

Analysts polled by Reuters expect the country to book a fiscal surplus of 18.6 percent of gross domestic product when the current fiscal year ends, much larger than any of its fellow Gulf oil exporters.

Kuwait sets aside 10 per cent of revenues for a future generations fund, a nest egg for when its vast oil resources dry up.-Reuters