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IMF expects Kuwait to need $180bn in financing over the next six years

Kuwait expects a budget deficit of $30.31bn in the fiscal year starting on April 1, 2020 a deficit increase of 19 per cent compared to the previous year

The International Monetary Fund (IMF) estimates that Kuwait will require around $180bn (€163bn, £137bn) in financing over the next six years due to its “modest” fiscal measures and expectations of lower oil prices.

Earlier this month Kuwait said it expects a budget deficit of 9.2bn dinars ($30.31bn) in the fiscal year starting on April 1 2020, a deficit increase of 19 per cent compared to 2019.

“Subdued oil prices and output are weighing on near-term growth prospects and external and fiscal balances,” the IMF said in a statement.

Kuwait was among the most strongest economies in the Gulf region when oil prices sank in 2014-2015 due to low debt and large financial assets.

But it has not hit global debt markets since its $8bn debt sale in 2017. This is due to a delay from parliament which has yet to pass a law that would allow it to raise its debt ceiling and to issue debt with longer maturities.

The IMF expects Kuwait’s consolidated fiscal balance to turn from a 5.5 per cent of gross domestic product surplus in 2019 to a deficit of a similar amount in 2025, which would lead to financing needs of some $180bn over the next six years.

Growth in Kuwait’s non-oil sector improved last year but lower oil prices and output cuts effected its oil sector, resulting in overall economic growth of about 0.7 per cent in 2019, down from a 1.2 per cent growth in 2018.

However, growth is expected to stabilise to an annual rate of 2.7 per cent from 2021 to 2025, after growth of 1.5 per cent this year. These estimates are based on the fund's assumption that oil prices would decline from $62 per barrel in 2019 to about $56 per barrel in 2023.

Kuwait’s 2020-2021 budget assumes an oil price of $55 a barrel.

FURTHER READING: How Middle East conflicts have affected oil markets in the past

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