Meed | Fiscal deficit pushes Kuwait towards reforms

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”.

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Dominic Dudley

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Jeddah Airports Company (Jedco) has outlined plans for the next phase of expansion at King Abdulaziz International airport (KAIA) in Jeddah.

The programme comprises six upcoming contractor packages spanning airside works, terminal upgrades and utilities as Jedco advances its long-term expansion plans.

The opportunities include airfield rehabilitation; a five-year construction framework covering multiple workstreams and facility types; a Terminal 3A (T3A) package; Terminal 1 (T1) optimisation; a fuel farm; and Concourse C works.

The packages cover terminal buildings and ancillary facilities, runways, taxiways and aprons, hangars, fuel systems, airside facilities, supporting infrastructure and utility networks.

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The T3A package is planned for Q1 2027 and will be delivered under an early contractor involvement contract. Local contractors are encouraged to bid as part of a joint venture with an experienced international partner.

T1 optimisation is planned for Q4 2027, the fuel farm for Q2 2027, and Concourse C – currently the latest of the six milestones – for Q2 2028.

The new packages add detail to Jedco’s wider expansion plans disclosed in 2023, when it was reported that the company would invest SR115bn ($31bn) to increase KAIA’s capacity to 114 million passengers a year, with an overall completion target of 2031.

Jedco has recently awarded several significant contracts linked to the airport’s upgrade programme.

In November 2024, a joint venture of local Algihaz Contracting and Turkey’s TAV was awarded a contract to rehabilitate the South Terminal to serve Umrah and Hajj pilgrims, with Singapore’s Surbana Jurong acting as consultant.

Earlier that year, Jedco also awarded France’s Alstom a contract to increase the capacity of the Innovia automated people mover at Terminal 1, including new cars and upgrades to signalling, communications and controls.

Surbana Jurong is expected to play a leading role in future KAIA expansion plans and is currently providing technical advisory and project management consultancy for more than 100 capital projects for Jedco, valued at over SR6bn ($1.6bn).

These upgrades are expected to boost KAIA’s annual capacity in line with Saudi Arabia’s Vision 2030 and National Aviation Strategy, enhancing the experience for domestic travellers and millions of Hajj and Umrah pilgrims.

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Contractor wins $105m Medina university hospital deal

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Riyadh-based construction firm Al-Mansouria General Contracting Company has been awarded a SR396m ($105.6m) contract to complete the remaining construction works on the Taiba University Hospital project in Medina.

The contract scope includes structural completion, remaining civil works, mechanical, electrical and plumbing installations, specialised clinical fit-outs and medical gas infrastructure to bring the long-stalled facility into operation.

Located on King Khalid Road along Medina’s Third Ring Road, the teaching hospital will have a capacity of 563 beds.

The contract duration is three years, with delivery targeted for late 2029.

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The project’s first phase was initially signed in December 2011 with local firm Al-Muhaidib Contracting under a SR500m ($133.3m) contract.

Groundbreaking for the eight-storey complex took place in July 2013. The project covers a gross floor area of more than 200,000 square metres.

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READ THE SEPTEMBER 2026 MEED BUSINESS REVIEW – click here to view PDF

Nuclear power ambitions gather pace; Kuwait keeps dealmaking alive despite war; Region invests in raising gas processing capacity.

Distributed to senior decision-makers in the region and around the world, the September 2026 edition of MEED Business Review includes:

> AGENDA: Gulf nuclear revival takes shape

> MARKET FOCUS: Kuwait keeps dealmaking alive under fire

> INDUSTRY REPORT: Gas processing takes centre stage in Mena region

> INTERVIEW: Emsteel persists with business productivity and efficiency

> TUNNELS: The Gulf’s next construction boom is happening underground

To see previous issues of MEED Business Review, please click here

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Oman tenders Thumrait Industrial City infrastructure
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Oman’s Public Establishment for Industrial Estates (Madayn) has tendered an estimated RO15m ($39m) contract to develop infrastructure for Thumrait Industrial City.

The tender was issued on 14 September, with bids due by 12 November.

The scope covers site-wide utilities and services, including an internal road network, stormwater channels and culverts. It also includes installing sewerage and water networks, along with landscaping works.

In addition, Madayn intends to build plug-and-play industrial units and a facilities building.

The first phase of the development will cover about 120,000 square metres (sq m).

Thumrait Industrial City is located in Oman’s Dhofar Governorate and spans an area of more than four million sq m.

The project location is close to concession blocks, quarry sites and the Najd agricultural areas. It is positioned to attract industrial investments in sectors such as mining and minerals processing (including gypsum and cement), food production, and a range of light and general manufacturing activities.

In March, Madayn said it is preparing to invest more than RO245m ($637m) to upgrade and expand infrastructure across its industrial cities between 2026 and 2030, as part of efforts to attract new investment and advance economic diversification.

According to media reports, Madayn chief executive Dawood Bin Salim Al-Hadabi said the programme is part of an expanded, phased plan aligned with Oman Vision 2040 and the authority’s long-term Madayn 2040 strategy.

The objective is to deepen Oman’s industrial base and spread growth across the sultanate’s governorates.

Madayn said the pipeline comprises about 90 strategic projects to improve industrial-city infrastructure, extend serviced land and increase the overall ease of doing business for investors.

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State-owned upstream operator Kuwait Oil Company (KOC) has reduced the number of approved contractors for onshore drilling and shallow-well maintenance from 51 to 24.

Firms that are no longer qualified include major contractors such as Italy’s Saipem, Oklahoma-based Helmerich & Payne and Houston-based Patterson-UTI Energy.

The latest list still includes a wide range of Kuwaiti, regional and international companies, according to the latest update on its electronic system, published on 21 September 2026.

The full list of contractors that are now qualified to participate in tenders is:
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- Kuwait Drilling Company (Kuwait)
- Sun Drilling Kuwait (Kuwait)
- TDL Kuwait for Oil Rigs & Natural Gas Extraction Activities, Services and Facilities (Kuwait)
- United Precision Drilling (Kuwait)
- Abraj Energy Services (Oman)
- Adnoc Drilling Company (UAE)
- Arabian Drilling Company (Saudi Arabia)
- Anton Oilfield Services (China)
- China Oilfield Services (China)
- Egyptian Drilling Company (Egypt)
- CNPC Bohai Drilling Engineering Company (China)
- Great Wall Drilling Company (China)
- John Energy (India)
- Kerui Oilfield Service (China)
- KCA Deutag Drilling (Germany)
- Mohammed Al-Barwani Petroleum Services (Oman)
- Nabors Drilling International (US)
- National Drilling & Services Company (Oman)
- Sea & Land Drilling Contractors (Oman)
- Sinopec International Petroleum Service Corporation (China)
- Karamay Jianye Energy (China)
- Modern Drilling Company (Egypt)
- Grey Wolf Drilling International (US)
An earlier list, which was published on 11 February, included 51 qualified companies.

The reduction in qualified drilling contractors follows KOC’s notice on 27 April this year, informing existing qualified contractors that they would need to reapply.
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Wil Crisp

Abu Dhabi expects 45% emissions cut as electricity demand rises

21 September 2026

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Abu Dhabi-based Emirates Water & Electricity Company (Ewec) expects carbon emissions from power and water production to fall by more than 45% by 2035 as the UAE expands renewable energy and reverse osmosis (RO) desalination.

The state offtaker's latest long-term system planning forecasts emissions will decline from about 42 million tonnes in 2019 to approximately 23 million tonnes in 2035.

The reduction is expected despite annual electricity demand that is forecast to rise by about 70% in 2026-33.

Ewec said the expansion of renewable energy and the shift towards RO desalination will be the principal drivers of the reduction.

The company plans to increase Abu Dhabi's solar capacity to 14GW by 2030 and more than 35GW by 2035. This will be supported by up to 15GW of battery storage capacity.

According to regional project tracker MEED Projects, Ewec has over $16bn-worth of power and water projects in the execution stage as part of its long-term procurement programme to increase renewable energy and low-carbon water production capacity.

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It also comprises the 1GW Al-Dhafra open-cycle gas turbine power plant, the 2.5GW Taweelah C combined-cycle gas turbine (CCGT) plant and a separate 400MW bess IPP.

As previously reported, it is expected that the developer's agreement for the 3.3GW Al-Nouf 1 CCGT IPP will be signed by the end of the year, while contractors are preparing to submit bids for a separate 2.6GW power plant project in Ajman.

The expansion of solar and battery storage is expected to reduce the system's reliance on gas-fired generation. However, gas-fired generation will continue to provide flexibility to support the system and balance intermittent renewable power output, according to Ewec.

The offtaker also expects RO desalination to account for more than 95% of total water production by 2035, with the procurement programme supporting the Abu Dhabi Department of Energy's Clean Energy Strategic Target 2035 for electricity production and the UAE Net Zero by 2050 Strategy.