As has become customary, no sooner had the Council of Ministers approved, at its latest meeting, the draft decree-law adopting the state’s final accounts than our annual exercise came due once again: To set the year’s budget beside its final outcome and examine the distance between expectation and reality. Each time, we look for something that might justify a more hopeful reading, offer a fleeting measure of satisfaction, or reveal a welcome departure in the effort to reshape the state’s economic model.
Yet, regrettably, this year’s comparison leaves us with little to offer but an apology — on our own behalf, and on behalf of anyone who wishes to join us. There is nothing new to report, except that the old has once again renewed its claim on the present.
The figures nevertheless contain truths that deserve attention. The deficit was, and remains, structural rather than a passing consequence of oil-price movements. Total revenue covered only about 70 percent of public spending, while oil revenue alone was sufficient to meet roughly 90 percent of the wage bill and related compensation. Oil accounted for nearly 97 percent of the revenue-side variance this year. Yet the final accounts also attest to the relative discipline of the budget’s non-oil revenue estimates — modest though their scale may be, and limited though their effect remains on the overall balance.
The rise in non-oil revenue as a share of total revenue is therefore one of those statistics that is accurate in appearance yet often misread in the Kuwaiti context. The meaningful question is not whether the ratio has risen, but why. It matters only when the increase reflects broader productive activity and a larger contribution from the private sector — not when it results merely from a contraction in oil receipts and a shrinking denominator. In fairness, though not as an endorsement of the broader picture, actual spending below the approved budget absorbed roughly half the shock from weaker revenue. Had expenditure proceeded exactly as originally planned, the final deficit would have approached KD 8 billion. Yet the restraint was not evenly distributed across the spending structure. Its burden fell more heavily on investment than on rigid expenditure, easing the immediate deficit without disturbing its deeper roots.
The actual deficit is too large to be contained by marginal adjustments to the instruments of public finance. It amounted to about 43 percent of total revenue, 30 percent of total expenditure and roughly two and a half times non-oil revenue. Moreover, because the public accounts are prepared on a cash basis, they do not necessarily reveal the state’s full financial position. They do not adequately capture obligations already incurred but not yet paid, nor the liabilities that weigh on the future—particularly pension and actuarial commitments.
Measured against the structural reform required to rebuild the state’s economic model, this year’s reading returns us to a scene repeated so often that it has become familiar. Raising non-oil revenue through subsidy reform, taxes, fees or similar measures is not, in itself, economic reform. These are fiscal instruments. They are neither virtuous merely because their proceeds rise, nor deficient merely because they fall. Their worth depends on the purpose they serve, the uses to which their proceeds are put and the changes they produce in the structure of the economy.
A state may collect more while leaving its economic model untouched. It may also endure tighter resources in the present while beginning to build a productive asset whose benefits extend well beyond the age of oil. In the end, the question is not simply how much enters the Treasury, but what independent and sustainable productive capacity that income is used to create.
If sustainability is truly the objective, its clearest path runs through expanding non-oil exports, widening their base and cultivating the industries, services, knowledge and competitive conditions that can sustain them. The proposition is simple to state and difficult to execute. What remains puzzling, however, is not its difficulty, but how long it has taken us to acknowledge something so self-evident.
NOTE: Abdullah Al-Salloum is an economist, strategic developer, investor and author
