World Economy

Kuwait Needs $100b Over 5 Years to Cover Deficit

Kuwait Needs $100b Over 5 Years to Cover Deficit
Kuwait Needs $100b Over 5 Years to Cover Deficit

Kuwait will need $100 billion of additional financing over the next five years as mandated contributions to its Future Generations Fund leave a fiscal deficit, according to the International Monetary Fund.

Contributions to the fund, excluding investment income, will mean an annual deficit of about 15% of gross domestic product, the IMF said in a statement concluding its 2017 Article IV consultation. Excluding FGF contributions and income, the lender expects Kuwait’s overall budget to remain “nearly balanced” through 2019, assuming a baseline oil price of $49 a barrel, Arabian Business reported.

Kuwait has cut subsidies and plans to introduce value-added taxation to plug a budget shortfall triggered by lower crude prices and production. It tapped international debt markets for the first time—raising $8 billion in March—and is also considering raising the debt ceiling, introducing an annual spending cap and changing the law to allow the sale of 30-year bonds.

The IMF expects Kuwait’s economy to contract 2.5% this year, driven by a 6% reduction in oil production as part of an OPEC agreement aimed at tackling a global glut. Non-oil economic growth is expected to be 2.5% this year on higher confidence, according to the fund.

Kuwait’s additional financing needs “will continue to be met through a limited amount of domestic borrowing, external borrowing, and drawdown” of assets in its General Reserve Fund, the IMF said in the statement.

The government has submitted a draft law on obtaining loans from international and local financial institutions to address the state’s budget deficit, rapporteur of the financial and economic affairs committee in the national assembly, MP Saleh Ashour, said Thursday.

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