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ACCORDING to some foreign European banks, Kuwait’s annual budget for the 2023/2024 fiscal year is based on an oil price of $88 per barrel, which is the highest among the Arabian Gulf countries. Other countries have balanced budgets based on oil prices that are $46 for Qatar and the Emirates, and between $75 and $76 per barrel for the rest.
The European bank assumes that other countries in the Arabian Gulf region have their ways and means to generate the additional cash that is required from outside investments and other resources. They ignore the fact that Kuwait has more than $650 billion worth sovereign wealth fund invested globally, mainly in the USA, Europe and the Far East countries.
They are either unaware or are ignoring the fact that neither the Kuwait government nor its finance minister can transfer the funds to the budget. We in Kuwait are not allowed by law to touch any of Kuwait’s investments, and are not allowed to borrow or do anything with our funds without the approval of the Parliament. This is because our wealth funds belong to the future generation and cannot be touched, as it belongs to the future children of Kuwait. The most comfortable rate for the Arabian Gulf countries to balance their budgets is around $100 per barrel.
However, some of these countries can generate additional income from non-oil sources but we in Kuwait are still lacking in this aspect due to lack of firm stance and determination. It seems there is no seriousness in finding new sources of income, and the reasons for this are unknown, as we can always borrow and privatize some of our oil sectors. For sure this is not a pleasant situation, but it is hard to convince all, as they perhaps have other priorities in mind, or are waiting for longterm strategies. With the current Russia-Ukraine war, we feel optimistic that the oil price will remain firm during the coming years due to the absence of Russian oil, and the increased need for Arabian Gulf oils.
However, the big oil companies are not interested in investing in oil, but why should they as long as they are making and generating profits and cash from the OPEC+ and from current oil investments. Generating cash and balancing state budgets should not be the ultimate objective; rather the focus should be on creating human resources with meaningful skills.
There is a lack of skilled people who can perform simple hand work jobs in Kuwait and most Arabian Gulf countries. As a result, we have far too many engineering graduates who are finding it hard to find suitable jobs. Yes, on paper Kuwait has the highest balanced budget number of $88, but let us wait for the year end result, as most likely we all will end up with a number of $100 per barrel to balance our books by the year end.
By Kamel Al-Harami
Independent Oil Analyst