meed-logo

line1 line2 line3
SIGN IN / REGISTER

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”.

https://image.digitalinsightresearch.in/uploads/NewsArticle/12289430/main.gif
Dominic Dudley

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Sharjah developer launches Al-Mamzar towers scheme

    9 June 2026

    Local real estate developer Alef Group has launched a mixed-use development in the Al-Mamzar area of Sharjah. The Linar project is valued at AED4bn ($1.1bn) and comprises five residential towers and one commercial tower. Across the development, the 50- to 55-floor towers will offer a total of 2,620 residential units.

    With 325 metres of sea-facing frontage overlooking Al-Mamzar Beach, the development also includes retail and service spaces. Tower A, which forms part of Phase 1 of the project, is expected to be completed from 2030 onwards. 

    In a statement, the developer said that following strong demand for expressions of interest (EoIs) in Tower A, Alef Group expanded EoIs to include towers B and C. All Phase 1 EoIs have now been fully reserved, representing a total of 1,572 residential units with a combined value of over AED2bn. The group is preparing to open EoIs for towers D and E.

    In April, Alef Group awarded Abu Dhabi-based construction firm A&M International a AED750m contract to build the next phases of its Hayyan residential community in Sharjah. The scope includes the construction of more than 700 villas and townhouses across three clusters – Samr 1, Samr 2 and Deem – along with Hayyan Mall, a clubhouse and associated infrastructure works.

    The Hayyan masterplan includes seven residential clusters: Alma, Arim 1, Arim 2, Arim 3, Samr 1, Samr 2 and Samr 3.

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

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17157150/main1720.jpg
    Colin Foreman
  • Record investment drives Jordan’s utilities market

    9 June 2026

     

    In April, Jordan signed the final technical and legal agreement for its landmark National Water Carrier Project, paving the way for the financial close of the kingdom’s largest planned water infrastructure project to date.

    The agreement represents a significant step forward for the scheme, which is now projected to reach $5.6bn in total costs, including financing, up from earlier estimates of $3.5bn.

    Paris-based investment and utility firms Meridiam and Suez were awarded the contract last year to develop the project in partnership with Jordan’s Water & Irrigation Ministry.

    Since then, multiple large-scale financing agreements have been put in place for the project, which is expected to supply about 40% of Jordan’s drinking water needs.

    While new contract awards have been limited in 2026, the successful execution of the Aqaba-Amman Water Desalination and Conveyance scheme will help reassure the market that large-scale infrastructure projects of this nature can move forward.

    The project is set to reduce the benchmark water cost from about $3 a cubic metre in 2024 to approximately $2.7 and is crucial to addressing Jordan’s severe water scarcity.

    Prime Minister Jafar Hassan recently said that the scheme, along with the Aqaba Port railway project, represented “the largest level of foreign investment in the kingdom’s history”.

    For its part, the government has said it will contribute $722m to the Aqaba-Amman project, representing the largest single capital expenditure in the state budget.

    Upcoming projects

    Looking forward, there is a healthier pipeline of new water projects, led by a two-phased wastewater treatment project at Wadi Zarqa.

    The first phase will have an initial capacity to treat 150,000 cubic metres a day (cm/d) of wastewater by 2030.

    The $150m second phase covers an independent sewage treatment plant with a capacity of 200,000 cm/d. Both tenders are expected to be released in the coming months.

    Two larger projects, valued at $300m each, are currently in the planning stages. Both are managed by Yarmouk Water Company and involve major transmission pipeline works in Ajloun and Irbid as part of the Jordan Water Sector Efficiency Project.

    The Jordan Water Sector Efficiency Project is a World Bank-backed programme aimed at reducing water losses, improving utility performance and enhancing the efficiency of water services across the kingdom.

    Power contracts

    Jordan’s power sector is set for a record-breaking year following the announcement that a $900m combined-cycle gas turbine (CCGT) plant will be developed in partnership with Etihad Development Company, a subsidiary of the UAE’s Etihad Water & Electricity (EtihadWE).

    The project will be developed under a build-own-operate model with Jordan’s National Electric Power Company (Nepco) purchasing electricity under a 25-year power-purchase agreement.

    For context, Jordan’s power sector saw just $33m in total contract awards in 2025, according to MEED Projects.

    The full-year total last exceeded $100m in 2022, when there were $111m of contract awards. The plant is expected to meet about 10% of Jordan’s electricity demand once operational.

    The kingdom has also been looking at other forms of power generation, such as Jordan’s first 450MW pumped hydroelectric energy storage project near Al-Mujib Dam.

    Earlier this year, US-headquartered K&M Advisors and France’s Artelia were appointed as transaction advisers to carry out the final feasibility study for the project, which is expected to be tendered in the third quarter of 2026.

    The Ministry of Energy & Mineral Resources (MEMR) is also planning to undertake the construction of a 1,000MW wind power plant and battery energy storage system near the Port of Aqaba in Jordan.

    The renewable energy scheme could potentially support the kingdom’s emerging green hydrogen industry, including a separate planned $1bn green ammonia and hydrogen project in Aqaba.

    In May, the project became the first publicly announced green ammonia project in Jordan to receive development approval from the Council of Ministers.

    The project would be developed by Jordan Green Ammonia, a special-purpose vehicle funded by the UAE-based 7Fidelity Group and Poland’s Hynfra.

    The project in Aqaba is expected to produce 100,000 tonnes a year of green ammonia from 2030

    Of approximately $6bn-worth of power projects in the pre-execution phase, it is worth noting that about $4.4bn are still in the early study or feed stages.

    Near-term awards are likely to come from several smaller substation and power generation schemes.

    Jordan-Syria power link

    Among the wider pipeline of regional opportunities, Jordan’s power sector could also benefit from efforts to restore electricity connectivity with neighbouring Syria.

    Syria’s Public Establishment for Transmission & Distribution of Electricity recently tendered a contract to repair the 400kV high-voltage interconnector transmission lines between the two countries.

    The works form part of Syria’s $146m Electricity Emergency Project, which is being financed through a World Bank grant and aims to restore critical electricity infrastructure across the country.

    The rehabilitation of the Syria-Jordan interconnector is expected to enable the import of up to 600MW of electricity and represents one of several initiatives under way to rebuild Syria’s power network following years of conflict and underinvestment.

    More broadly, Syria is emerging as an active power market in its own right. In April, Germany’s Siemens Energy signed manufacturing agreements for major power plant projects being developed by a consortium led by Qatar’s UCC Holding.

    The contracts cover combined-cycle power packages for the Zayzoun and Deir Azzour power plant projects, announced last year as part of a $7bn memorandum of understanding between the consortium and Syria’s Ministry of Energy.

    The May 2025 agreements include four combined-cycle gas turbine power plants in Traifawi, Homs and Zayzoun, Deir-Azzour and Mehardeh in Hama with an installed capacity of 4GW.

    Additionally, a 1GW solar power plant will be developed in Wedian Al-Rabee in Syria’s southern region.

    Most of these projects, awarded under concession agreements following a strategic memorandum of understanding framework, are due to come online in 2029.

    After years of inactivity, this is considerable progress. The next step is attracting sufficient interest in new and upcoming tenders. This will signal whether international contractors are ready to re-engage with the country’s power sector.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17157016/main.gif
    Mark Dowdall
  • PIF-owned Ardara tenders Al-Wadi sewer package

    9 June 2026

     

    Ardara, a subsidiary of Saudi Arabia’s Public Investment Fund (PIF), has issued a tender for the trunk sewer diversion and associated works package at its Al-Wadi development in Abha in Saudi Arabia’s Asir region.

    The scope includes the construction of rainwater and flood drainage networks, roads and transport infrastructure, and associated works within the wider Al-Wadi project.

    The bid submission deadline is 15 June.

    The sewer diversion package, valued at about $20m, is part of Ardara’s wider Al-Wadi development in Abha. The company, launched by PIF in 2023, is developing the 2.5-square-kilometre Al-Wadi destination in Abha as a mixed-use tourism and lifestyle development. The project will include residential, hospitality, commercial and recreational assets. 

    As MEED understands, the sewer diversion works are expected to facilitate the development of future phases of the Al-Wadi project by relocating existing wastewater infrastructure within the site.

    The tender follows demolition works completed on the site last year.

    Previously, in 2024, US-based Parsons was appointed to provide project management and supervision services for the project.

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

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17156098/main.jpg
    Mark Dowdall
  • Abu Dhabi selects team for 3.3GW Al-Nouf IPP

    9 June 2026

     

    State utility Emirates Water & Electricity Company (Ewec) has selected a preferred developer and contractor for the 3.3GW Al-Nouf independent power producer (IPP) project in Abu Dhabi, according to sources.

    Located within the newly established Al-Nouf complex, the facility will be the largest single-site, carbon-capture-ready, combined-cycle gas turbine plant in the UAE. 

    Japan’s Sumitomo Corporation has been selected as the preferred developer, with the power-purchase agreement (PPA) expected to be signed in the coming weeks, sources said.

    It is also understood that a joint venture of Spain’s Tecnicas Reunidas and Egypt’s Orascom Construction has been picked as the preferred engineering, procurement and construction (EPC) contractor.

    Three developer consortiums submitted bids earlier this year, along with Sumitomo as the only company to bid individually.

    The bidders included:

    • Aljomaih Energy & Water (Saudi Arabia) / Sembcorp Industries (Singapore) / EDF Power Solutions (France)
    • Engie (France) / Korea Overseas Infrastructure & Urban Development Corporation (Kind) / Korea Western Power Company (Kowepo)
    • Korea Electric Power Corporation (Kepco) / Etihad Water & Electricity (EtihadWE) (UAE)
    • Sumitomo (Japan) 

    Ewec issued a request for proposals for the project last August. It had previously received statements of qualifications for the contract in April 2025.

    This follows confirmation earlier this month that Ewec has signed a PPA with a developer consortium for the 2.5GW Taweelah C IPP project.

    A team of UK-based Alderbrook Finance and US-based Sargent & Lundy is providing financial and technical advisory services to Ewec for the Taweelah C IPP.

    As MEED previously reported, both projects are following the model of Abu Dhabi’s IPP programme, in which developers enter into a long-term agreement with Ewec as the sole procurer. 

    This involves the development, financing, construction, operation, maintenance and ownership of the plant, with the successful developer or developer consortium owning up to 40% of the entity. The remaining equity will be held indirectly by the Abu Dhabi government.

    The project site for the Al-Nouf plant was selected for its ability to accommodate both seawater-cooled power generation and reverse osmosis desalination technologies. The plant will have the capacity to support several utility-scale energy and desalination projects in the future.

    The facility is scheduled to begin commercial operations in the third quarter of 2029.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17155245/main.jpg
    Mark Dowdall
  • Zoom launches new Saudi data centre at center3

    9 June 2026

    Zoom has announced a new data centre in Saudi Arabia to boost in-kingdom capacity for government and enterprise customers requiring local data residency.

    In a statement, Zoom said the data centre is located within center3, a Saudi-headquartered provider of carrier-neutral data centres and subsea cable systems linking Europe, Asia and Africa. Zoom said the data centre builds on its broader investment plans in the kingdom, including a $75m commitment made last year focused on artificial intelligence (AI)-enabled innovation and the advanced infrastructure required to scale it.

    Zoom said its existing regional data centre, established in 2023, already supports customers with local data residency requirements, while the new site will enhance services for government entities, enterprises and critical national infrastructure organisations.

    AI is an important part of Saudi Arabia’s economic growth plans leading up to 2030. In January, government officials confirmed that as the global economy is evolving rapidly with the rise of AI, some projects such as The Line at Neom have slowed down, while other projects related to the World Cup, Expo 2030, technology and AI have accelerated. 

    The largest AI project in the kingdom is being developed by Humain, which is owned by the Public Investment Fund (PIF). In May, it issued a tender inviting firms to develop infrastructure for its planned 6GW hyperscale AI data centre campus in Riyadh.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17155250/main.jpg
    Colin Foreman