Kuwait's Budget Deficit Widens in 2026-2027 Amid Falling Oil Revenues and Rising Spending

Kuwait | EcoPulse24

Kuwait’s draft budget for the 2026-2027 fiscal year underscores ongoing pressures on public finances, as expected declines in oil revenues are met with a notable increase in government spending. The Ministry of Finance announced that the new budget proposal features a significant deficit, even as total revenues remain relatively high.

According to official data, the 2026-2027 budget deficit is expected to reach KWD 9.8 billion (USD 32.12 billion), with total revenues estimated at KWD 16.3 billion (USD 53.42 billion). Kuwait’s fiscal year runs from April 1 to March 31 of the following year.

Figures show continued heavy reliance on oil, accounting for about 79% of total revenues (KWD 12.8 billion). However, this reflects a 16.3% decline from 2025-2026, when oil revenues stood at KWD 15.3 billion, due to more conservative assumptions about oil prices and production.

Non-oil revenues are projected at KWD 3.5 billion, representing roughly 21% of expected revenues, highlighting the still limited contribution of alternative income sources despite ongoing diversification efforts.

On the expenditure side, total spending is forecast to rise by 6.2% to around KWD 26 billion compared to the previous fiscal year. Salaries and related expenses make up the largest share at KWD 15.8 billion, underlining the significant weight of wages in the budget structure. Subsidies are estimated at KWD 4 billion, capital expenditures at KWD 3.1 billion, and other expenses at KWD 3.2 billion.

This composition points to a persistently high operational spending pattern, with a relatively smaller share allocated to capital investment. This limits the budget’s ability to support long-term growth or enhance alternative income sources beyond oil.

EcoPulse24 Analysis:
Kuwait's new budget highlights a fiscal paradox: relatively high revenues are nonetheless insufficient to cover consistently rising and rigid expenditures, widening the deficit and increasing reliance on financing. The fall in oil revenues exposes the fiscal vulnerability to energy market fluctuations, while non-oil income remains modest. Persistent growth in wage and subsidy bills constrains fiscal flexibility, making future reforms more complex. Given these dynamics, there is an urgent need to restructure spending and strengthen alternative financing tools, alongside accelerating revenue diversification reforms, to ensure fiscal sustainability and reduce the impact of oil shocks on the budget.