Fiscal deficit pushes Kuwait towards reforms
7 August 2024

The poor state of Kuwait’s public finances was laid bare in late July, when the Ministry of Finance announced it had run up a deficit of KD1.6bn ($5.2bn) for the fiscal year ending on 31 March.
A year earlier, the government had booked a rare budget surplus, following eight straight years in the red, but it seems unlikely that it will be able to return to a surplus any time soon. A combination of lower oil revenues, rising spending commitments and an underpowered non-oil sector means the strain on the public purse is rising rather than falling.
The main culprit for the recent budget shortfall was a 19% drop in oil revenue to KD21.5bn. Non-oil income rose by a little over 1% year-on-year, but at just KD2.1bn it remains a marginal element of the state’s finances.
Even as overall revenues were falling, state spending increased by around 13% to KD25.2bn. The vast majority of that – KD20.4bn – went on public sector wages and subsidies. Capital expenditure accounted for just 8% of the total, at KD1.9bn.
The outcome for the past year was, though, better than some had expected. The local NBK Capital, for example, had predicted a KD3bn deficit. Even so, it highlights how the economy remains almost entirely dependent on oil revenues and, by extension, how ill-prepared Kuwait is for a global transition away from hydrocarbons.
While other Gulf governments have been investing heavily in renewable energy projects and seeking to diversify their economies, Kuwait has made negligible progress in these areas.
Structural stagnation
The deficits of the past decade have dealt a significant blow to other elements of the country’s financial health. Speaking at the General Budget Forum in Kuwait in mid-July, Finance Minister Anwar Al-Mudhaf said the assets of the State Reserve Fund had fallen to just KD2bn, down from KD33.6bn a decade earlier.
The persistent failure of the government to push legislation through parliament allowing it to issue more debt has meant that savings have been steadily depleted to cover the budget deficits. The current trend is clearly unsustainable.
Ministry of Finance undersecretary Aseel Al-Munaifi told the same event on 14 July that the size of the budget deficit in the coming years would vary depending on oil prices, but predicted it could total KD26bn over the four years from 2025/26 to 2028/29 – far more than is left in the State Reserve Fund.
Falling oil revenues have also contributed to declines in the country’s GDP. The Washington-based IMF estimates it fell by 2.2% in 2023 and could drop by another 1.4% this year.
Amid all these problems, there have been a few positive signs. Annual inflation eased to 2.8% in June, its lowest level since November 2020, helped by softer prices for food, housing, utilities and transport. UK-based consultancy Oxford Economics predicts it should now stabilise, with a forecast of 2.9% in the coming year.
Kuwait Oil Company also announced a major discovery on 14 July, with an estimated 2.1 billion barrels of light oil and 5.1 trillion cubic feet of gas found at the offshore Al-Nokhatha field. More oil reserves will do little to change the economic climate of the country though, particularly when production levels are voluntarily capped under the Opec+ deal.
Controlling spending
The government of Prime Minister Sheikh Ahmed Abdullah Al-Salah appears to have recognised the need for a more fundamental change in direction, with Al-Mudhaf indicating that more will be done to keep spending under control.
The Ministry of Finance has pencilled in spending of KD24.5bn for the current fiscal year – against revenues of KD18.9bn, meaning a deficit of KD5.6bn. The finance minister has said the government is aiming to keep expenditure at the same level through to 2027/28.
That will be contentious though and may require more political resolve than the government is able to muster. On the other hand, it will find it easier to take unpopular action now than in the past, given the decision by Emir Sheikh Mishaal Al-Jaber Al-Ahmed Al-Sabah in May to suspend the National Assembly for up to four years, thereby removing a significant block to policy reforms.
The government may also now decide the time is right to follow most of its GCC neighbours and introduce VAT – more than six years after it was introduced in the UAE and Saudi Arabia – or other measures such as corporate income tax or ‘sin taxes’ on tobacco and sugary drinks. Such a move could provide a significant boost to non-oil revenues.
“I have been dubious about the prospects of substantial fiscal measures being implemented during the current period while parliament is suspended, given the risk that this would be unpopular and viewed as illegitimate, but the minister’s presentation seems to lay the groundwork for reforms,” said Justin Alexander, director of Khalij Economics.
If the government is to successfully limit its spending over the coming years, it will also need activity to pick up in the private sector, not least to provide more jobs for locals. At the moment, the vast majority of Kuwaitis who are in work are employed by a public sector entity.
The most recent employment market data showed job growth among Kuwaiti nationals of 3.2%, but as NBK Capital pointed out in a report on 23 July, “this was due to a gain in public sector jobs, while private sector employment fell”. Just 15% of working Kuwaitis have jobs in the private sector. Indeed, the public sector wage bill rose by 12% in the most recent financial year.
Al-Mudhaf noted in his comments to the General Budget Forum that public sector salaries are now equivalent to around 30% of Kuwait’s GDP, compared to 7-13% in other GCC states. Among other things, he blamed undisciplined hiring and weak performance evaluations for the rising wage bill.
The situation could get worse before it gets better. Alexander noted that “the expectation is that the pending reforms to equalise employment grades across the public sector will boost salary costs even further”.
Exclusive from Meed
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The contracts were formally awarded on 1 October, and each has a three-year construction period.
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Kuwait studies two oil export pipelines to bypass Hormuz15 October 2026
State-owned Kuwait Petroleum Corporation is considering developing two oil export pipelines that would bypass the Strait of Hormuz, according to a senior Kuwaiti oil official.
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Mohammed Al-Abduljalil, the deputy chief executive for planning and innovation at the KPC subsidiary Kuwait Oil Company, told Asharq Bloomberg that KPC had agreed with its partners in Saudi Arabia and the UAE to conduct feasibility studies for two separate projects.
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The pipelines would build on existing infrastructure and, if the plans are approved, are expected to take around four or five years to complete, Al-Abduljalil said.
He said the first project, currently under study, would use the route of the existing East-West pipeline, which connects the kingdom’s eastern oil-producing regions to its western coast.
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Gulf Spic submits lowest bid for Kuwait booster stations15 October 2026

Kuwait-based Gulf Spic General Trading & Contracting Company has submitted the lowest bid for a contract to upgrade gas booster stations in the country.
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Stability holds as project work continues14 October 2026

When Dean McGrail describes the performance of the region’s construction market, he keeps returning to a single word: “stable”.
After initial concerns that the market would experience a sharp downturn and project cancellations following the onset of conflict in the region, regional president McGrail says WSP has yet to see a single major contract cancelled across its regional portfolio.
“We have seen some projects re-evaluated – questions around whether the mix between residential and commercial is right, and whether it should be luxury residential,” he says. “But as of today, we have not seen any projects cancelled, which is a real sign of resilience in the market.”
Under the surface
That resilience does not mean nothing has changed. McGrail is careful to separate re-evaluation from cancellation. Projects already on site and selling into the market are pressing ahead. It is schemes that have not yet been released for off-plan sales that are being paused and reconsidered.
“None of the projects we are currently involved in have been put on hold or suspended,” he says. “It is more re-evaluation. Some of that is investor sentiment, but some of it is materials and logistics as well, which people do not necessarily consider.”
Logistics, in particular, is a pressure that rarely makes the headlines. According to McGrail, shipping disruption has complicated the delivery of heavy equipment on certain schemes. “If we have big pieces of kit coming in – chillers or turbines for a power station – that becomes challenging,” he says.
The bigger question is viability. And while rising material costs, set against softening sales prices, are forcing developers to reappraise the numbers, for now the balance sits firmly on the side of continuity. McGrail estimates that revalidation and feasibility work accounts for less than 3% of the firm’s current order book, with the remainder progressing as normal.
“Requests for proposals have not slowed down across any of our disciplines or business units,” he says. “We are definitely seeing an uptick in infrastructure.”
Infrastructure pivot
That focus points to where McGrail expects the next few years of growth to come from. Rail sits at the centre of the UAE story, alongside road upgrades and other major developments in Abu Dhabi. In Dubai, the clearest signal of intent is the expansion of Al-Maktoum International airport.
“Al-Maktoum is a really good indicator of the future direction of travel,” he says. “That is not a project that is slowing down. There has been a commitment to Emirates that it will move there, and it is still progressing.”
The scale of the airport – and the challenge of relocating an airline the size of Emirates in one move – raises the question of how it will be funded. Here, McGrail returns to the theme of stability and to the mechanism that underpins it.
“One of the beauties of this region is the ability of government to step in,” he says. “They can fund it. If the private sector does start to suffer, that is the backstop. They push money into infrastructure – roads, rail, airports – which keeps our industry moving.”
Saudi reset
In Saudi Arabia, the recalibration story predates the conflict, and McGrail says the change should be read as a strength rather than a retreat.
“I am positive,” he says. “When the reprioritisation started at the beginning of 2025, having lived through the global financial crisis here, I saw the decision to stop, re-evaluate and reprioritise expenditure as a positive. When Vision 2030 was set, Saudi Arabia had not won Expo or the World Cup, so the reprioritisation was the right thing to do. Saudi Arabia will come out of it stronger. Short-term pain, long-term gain.”
The nature of the work is shifting with the budget. McGrail sees the kingdom moving towards a model long familiar in the UAE, in which core infrastructure and a handful of landmark buildings are delivered first, before surrounding plots are carved up and sold on.
“You establish a few key iconic buildings, then the plots on the outside are carved up and they look for external investment to come in and develop them,” he says. “It is no different from Downtown Dubai, where Emaar built the Burj Khalifa and a few buildings, then started selling plots.”
That approach is increasingly tied to public-private partnerships (PPPs), although McGrail is measured on how far the model will stretch.
“PPP is definitely becoming more prevalent on some of the larger infrastructure projects, though still not as significant as it was made out to be when they first started talking about it,” he says. He sees industrials, mining, healthcare and schools as a natural fit, rather than PPP becoming a blanket procurement route.
Aviation is another priority. WSP was recently appointed to the rehabilitation of the existing terminal at Jeddah’s King Abdulaziz International airport, alongside a new terminal. It also recently secured a role on the expansion and upgrade of King Fahd International airport in Dammam.
“Aviation is definitely a key area of focus for us as we head into the next 12, 24, 36 months,” McGrail says.
Beyond the two dominant markets, McGrail sees pockets of activity but no challenge to the balance of the portfolio. In Qatar, he points to a recovery taking shape towards the end of last year, with WSP active on the Qatar Children’s Museum and continuing its long-running work with the Public Works Authority (Ashghal). Oman is generating masterplanning work, including reviving the Blue City scheme.
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Gas-fired projects drive resilience in UAE power sector14 October 2026

The $3bn Taweelah C combined-cycle gas turbine (CCGT) project has been the UAE power sector’s standout contract award this year, accounting for the majority of the $4.17bn in awards as of early September.
The total is well below the record $12.02bn awarded in 2025, when Abu Dhabi’s $6bn round-the-clock solar photovoltaic (PV) and battery energy storage system (bess) project lifted the market to record levels. However, 2026 remains broadly consistent with recent years, compared with $5.93bn in 2024 and $3.05bn in 2023.
According to MEED Projects, generation accounted for $3.06bn across three awards, while transmission contracts totalled $1.11bn.
Gas-fired focus
Emirates Water & Electricity Company (Ewec) signed the power-purchase agreement (PPA) for Taweelah C in June with a consortium comprising Abu Dhabi National Energy Company (Taqa), Saudi Arabia’s Al-Jomaih Energy & Water Company and Singapore’s Sembcorp Industries.
The scale of the 2.5GW independent power producer (IPP) provides a useful lens through which to view the wider market. Although the UAE continues to expand solar generation and battery storage, it is still investing heavily in flexible thermal capacity to support rising electricity demand and a grid with significant renewable generation.
Major gas-fired opportunities are also moving into the Northern Emirates, with state utility Etihad Water & Electricity (EtihadWE) preparing to receive offers from five contractor groups for the 2.6GW Al-Zawra CCGT project in Ajman.
The project follows the retirement of EtihadWE’s older 200MW Al-Zawra gas plant in 2023. With Ewec acting as offtaker, the scheme also points to a wider role for EtihadWE in developing large-scale generation.
It is understood that the Ajman project will be the first of at least three planned power plant projects procured by the utility under a new long-term roadmap for future projects across both power and water.
Abu Dhabi’s 3.3GW Al-Nouf IPP is another major gas-fired plant moving towards execution. Japan’s Sumitomo Corporation is expected to formally sign the PPA by the end of the year, while the joint venture of Spain’s Tecnicas Reunidas and Egypt’s Orascom Construction is also set to be confirmed as the engineering, procurement and construction (EPC) contractor.
To put this into context, the deal would make 2026 the second most valuable year for power sector investment on record, eclipsing both 2017 and 2018, when contract awards in the UAE reached $7.39bn and $7.27bn, respectively.
Solar and storage
The UAE’s renewable procurement is increasingly combining solar generation with storage to provide electricity beyond daylight hours.
Dubai Electricity & Water Authority (Dewa) is preparing to award the seventh phase of the Mohammed Bin Rashid Al-Maktoum Solar Park, with Abu Dhabi Future Energy Company (Masdar) submitting the lowest tariff for the project in July.
China’s BYD will act as a bess supplier for the project, which combines 2,000MW of PV capacity with a 1,400MW bess designed to discharge for six hours, equivalent to 8,400MWh of stored energy.
The storage component will allow Dewa to use more solar power after sunset, reducing the gap between daytime generation and the evening demand peak.
The 1,800MW sixth phase is also nearing completion, with Larsen & Toubro delivering the estimated $1.5bn project for Shuaa Energy 4, the project company formed by Dewa and Masdar.
Dewa has increased the planned capacity of the solar park to 7,260MW by 2030, from its earlier target of 5,000MW.
Furthermore, Ewec is advancing its 1.5GW Al-Zarraf solar PV plant, with EDF and Korea Western Power Company selected as the consortium to develop the project.
Grid expansion
Multibillion-dollar IPP schemes have driven annual award values in recent years, while transmission work continues to provide a steadier flow of opportunities for contractors and equipment suppliers.
Transmission awards fell to $1.11bn across 22 packages in 2026, from $2.98bn in 2025, reflecting the absence of a comparable large-scale package rather than a halt in network investment.
Ewec and Taqa are expanding 400kV and 132kV networks across Abu Dhabi and the Northern Emirates, while Dewa continues to reinforce its cable and substation systems in Dubai.
In September, EtihadWE received bids for a contract to carry out a techno-economic feasibility study for a proposed 2GW subsea electricity interconnector with India.
The proposed 1,400-kilometre link would be the UAE’s first direct subsea cross-border electricity interconnector, illustrating a potential longer-term ambition to connect the UAE to wider regional and international power markets.
Earlier this year, the GCC Interconnection Authority awarded Omexom, part of France’s Vinci Group, a contract to build a 400kV overhead transmission line between the UAE and Saudi Arabia.
In October, the UAE and Saudi Arabia signed a memorandum of understanding to advance cross-border electricity interconnection, paving the way for feasibility studies on power exchange, commercial electricity trading and the expansion of the wider GCC interconnection grid.
Waste-to-energy
Waste-to-energy continues to become an increasingly important part of the UAE’s infrastructure pipeline as the country seeks to reduce landfill dependence and diversify its power mix through alternative generation sources.
Dubai Municipality recently invited developers to submit expressions of interest for its planned Jebel Ali waste-to-energy public-private partnership, a greenfield facility designed to treat up to 6,000 tonnes of municipal solid waste a day.
According to a source, the municipality plans to prequalify developers later this year, then issue a request for proposals in the first quarter of 2027.
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