Kuwait's Ministry of Finance officially announced the outlines of the draft state budget for the 2026-2027 fiscal year, revealing projections of a significant budget deficit that will cast a shadow over the financial planning of the oil-rich Gulf state. According to data published on the ministry's official account on the X platform, the deficit is estimated at approximately 9.8 billion Kuwaiti dinars, equivalent to US$32.12 billion, reflecting the ongoing challenges facing public finances amidst the volatility of global energy markets.
Details of revenues and expenditures in the new budget
Official data indicates that total projected revenues in the new budget are estimated at approximately 16.3 billion dinars ($53.42 billion). As has historically been the case in the Kuwaiti economy, oil revenues remain the backbone of the state's resources, expected to contribute 79% of total income, amounting to 12.8 billion dinars. However, this figure represents a significant decrease of 16.3% compared to the estimated oil revenues in the previous fiscal year's budget (2025-2026), which were 15.3 billion dinars.
In contrast, the state is seeking to boost non-oil revenues, which were estimated at about $3.5 billion, representing 21% of total revenues, in a move that reflects attempts to diversify sources of income, although its impact remains limited in the face of the dominance of the oil sector.
The budget for salaries and subsidies has ballooned
On the expenditure side, the draft budget reveals the continued dominance of salaries and related expenses in public spending, with a substantial allocation of 15.8 billion dinars, in addition to various subsidies amounting to approximately 4 billion dinars. These figures indicate that the largest portion of the budget is allocated to current expenditures, placing a strain on resources available for development projects. Capital expenditures (investment spending) were estimated at only 3.1 billion dinars, while other expenditures totaled 3.2 billion dinars.
Overall, total expenditures are expected to rise by 6.2% to approximately 26 billion dinars compared to the previous fiscal year, widening the gap between revenues and expenditures.
Economic context and break-even price
The budget estimates were based on a conservative oil price of $57 per barrel, a price significantly lower than the break-even price needed to cover expenditures without a deficit, which the ministry set at $90.5 per barrel. This large difference between the adopted price and the break-even price explains the size of the projected deficit.
This announcement comes as Kuwait seeks to implement economic reforms within its "Kuwait 2035" vision, which aims to transform the country into a financial and commercial hub and reduce its over-reliance on oil. However, current figures confirm that there is still a long way to go to achieve sustainable fiscal balance, as the Kuwaiti economy remains highly sensitive to any decline in global oil prices. This necessitates accelerating the pace of structural reforms and diversifying income sources to ensure financial stability for future generations.
It is worth noting that the fiscal year in the State of Kuwait always begins on April 1st and ends on March 31st of the following year, which is the approved cycle for approving and implementing the state’s general budget.
