With the falling oil prices and growing state expenditures, Kuwaiti economists highlighted the need to rationalize the country's spending as the decline in oil prices will lead to significant income changes.
Cancelling unneeded huge capital projects would reduce Kuwait's budget from 22.5 billion U.S. dollars to 15 billion dollars, Talal Al-Seef, a professor at the College of Engineering and Petroleum at Kuwait University, told Xinhua in a recent interview.
With a drastic fall in oil demand and the stoppage of factories in Asia, the main market for Gulf oil companies, Kuwait and other Gulf Cooperation Council (GCC) countries are suffering from their overstretched budget.
The coronavirus has prompted the Kuwaiti government to spend additional money on the needed expenses, Maitham Al-Shas, an economic analyst and general manager of a real estate company, told Xinhua.
"But because of its small population, these pressures would be alleviated if the health ministry controlled the coronavirus spread," Al-Shas noted.
Expecting the recovery of Kuwait's economy to start after the first quarter of 2021, Al-Seef said the quick solution to the current budget deficit is "to approve the public debt law and take advantage of low-interest rates in the global market."
"The year 2021 will be a disaster if the world economy did not recover. We will have to borrow twice, not only to cover the budget deficit but also the interests of the previous borrowing," he explained.
Al-Shas expressed optimism about the gradual return of business in Kuwait in May, noting the economic improvement is linked to business return and the upturn in oil price.
Hajjaj Bukhadour, a retired economist who had worked as a consultant in several companies, said the impact of the decline in oil prices on the Kuwaiti economy is limited.
"There will be no major impacts like the United States, France or Japan. It is not considered difficult to deal with as reducing expenses and suspending some projects will suffice for the government," he explained.
In addition, Kuwait will see about 10 billion dollars saved this summer in citizens' spending on tourism, Bukhadour added.
Abdul Sami Behbehani, CEO of Sharq Petroleum Consulting Company, expected oil prices to rebound in the first half of 2022 after oil tanks are liquidated by the end of 2021.
"I expect that the prices will then reach 80 dollars, but all is linked to the discovery of the vaccine," he noted.
The Organization of the Petroleum Exporting Countries (OPEC), Russia and other oil-producing nations, a group known as OPEC+, met on April 12 and finalized the deal of an output cut by 9.7 million barrels per day for May and June, or 10 percent of the global supply, to support oil prices amid the coronavirus pandemic.
Khaled Al-Fahdel, Kuwaiti oil minister, said Kuwait supports this consensus among OPEC's member states.
The Kuwaiti government has imposed a nationwide curfew to contain the spread of the coronavirus.
The government also closed stores, malls and barbershops as precautionary measures to curb the spread of the deadly virus.
Editor:Cherie
