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Kuwait lays out ambitious plans

29 August 2023

Commentary
John Bambridge
Analysis editor

Kuwait’s new cabinet has so far made all of the right noises to reassure the country’s business leaders. It has laid out an ambitious programme of new public spending and secured approval for an expansionary budget with increased public spending in the 2023-24 fiscal year.

On paper, the government is on track to restart many stalled schemes and provide its projects sector with some much-needed stimulus. It has submitted a four-year programme of strategic projects to the National Assembly that includes Kuwait’s leg of the GCC railway programme, Terminal 2 of Kuwait International airport and port expansions.

In practice, it remains to be seen if the plans of the cabinet – the country’s fifth in less than a year – can be brought to fruition.

The hard work will only begin when parliament resumes its deliberations in October. However, the lesson of late in Kuwait has been that major projects are highly susceptible to political infighting.

Overall, Kuwait’s projects market has contracted significantly in recent years, both in terms of the value of project awards and the total value of work under execution, which stands at about $27bn.

Of particular concern is the systemic stalling of major infrastructure projects in the oil and gas sector – the critical sector that fuels the Kuwaiti economy. The dearth of recent oil contract awards is such that it has caused international contractors to shut down offices in Kuwait.

Now, the government plans to raise its oil production capacity to 3.15 million barrels a day (b/d) within a few years, up from 2.7 million b/d, but the downsizing of contracting capacity could make the pace of the proposed ramp-up a challenge.

Kuwait also faces challenges in its utilities sector, which saw the August heat cause power loads to exceed capacity, resulting in blackouts and water supply shortfalls.

The country aims to address its electricity and water supply issues with several new independent water and power plants and upgrades to existing infrastructure. There are positive signs of progress with many of these projects, with the plans well advanced.

Looking ahead, oil price volatility remains a major risk factor for Kuwait’s fragile finances, especially since parliament is still unsold on the idea of turning to debt markets to finance public spending.

Unsavoury fiscal and structural reforms – including addressing the country’s public sector wage bill, which is soaring rapidly – remain vital if the country is to find itself on firmer fiscal footing. Whether there is political appetite for this is, again, the perennial question in Kuwait. Much hinges on the new government.

This month’s special report on Kuwait includes: 

> POLITICS: Stakeholders hope Kuwait can execute spending plans
> ECONOMY: Kuwait enjoys sustained non-oil growth
> BANKING: Kuwaiti banks enter bounce-back mode
> ENERGY: Kuwait’s $300bn energy target is a big test
> POWER & WATER: Warming erodes Kuwait’s power and water reserves
> CONSTRUCTION: Kuwait poised for renewed construction activity

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John Bambridge

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