Kuwait: Selected Issues

IMF Staff Country Reports, January 26, 2018

Source details

The paper focuses on fiscal expenditures with the aim of identifying potential areas for reform.
The authorities’ planned non-oil revenue measures are welcomed but, by themselves, will not reduce the authorities’ fiscal deficit sufficiently—highlighting the importance of expenditure reforms.
The paper draws from previous episodes of adjustment in Kuwait and conducts benchmarking—comparing Kuwait’s level of fiscal spending in various areas to that of peers—to identify areas for streamlining and efficiency improvement.
Kuwait needs to implement fiscal consolidation to adjust to durably lower oil prices.
The collapse in oil prices has resulted in substantial deterioration of both external and fiscal positions, leading to large fiscal financing needs.
To preserve fiscal buffers and provide equitable consumption for future generations, Kuwait needs to consolidate its fiscal position.
While the planned tax reforms and repricing of government services are steps in the right direction, fiscal consolidation also needs to rely heavily on streamlining expenditures.

Prioritize expenditure reforms alongside planned non-oil revenue measures to achieve sufficient fiscal deficit reduction.
Use benchmarking against peers to target areas of fiscal spending for streamlining and efficiency improvement.
Implement fiscal consolidation measures to address the deterioration in external and fiscal positions caused by the collapse in oil prices.
Combine tax reforms and repricing of government services with substantive expenditure rationalization to reduce large fiscal financing needs and preserve fiscal buffers.