Kuwait's Cabinet has agreed to cut government budgets by at least 20 per cent during the 2020-2021 fiscal year, it announced in a tweet yesterday.
According to the announcement, the cabinet ordered the ministry of finance to coordinate with all governmental departments to review public services and the value of government subsidies.
Kuwait's extreme dependence on oil is to blame, with hydrocarbon sales accounting for an estimated 90 per cent of total government income, Bloomberg reported.
Crude prices are around half the level Kuwait needs to balance the budget – before the mandatory annual transfer of ten per cent of revenue to its wealth fund.
Meanwhile, with parliamentary elections scheduled for later this year, the government is unlikely to be able to mount a significant fiscal policy response to the oil shock, credit rating company Fitch said in a report last month.
In May, the decline in oil prices and the value of investment assets since the start of the coronavirus outbreak had an adverse impact on the financial solvency of the state, Emir Sheikh Sabah Al Ahmad Al Sabah announced.
Last week, the National Bank of Kuwait SAK, the country's biggest lender, predicted the shortfall would reach 40 per cent of gross domestic product in the fiscal year.