Kuwait's budget deficit shrinks without public spending cuts

Cost-cutting measures, along with improved non-oil revenues, reduced the deficit by 32.4%. Al Majalla gives a detailed breakdown.

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Central Bank of Kuwait

Kuwait's budget deficit shrinks without public spending cuts

Amer Ziab Al-Tamimi

last update on 22 Sep 2025

Kuwait’s Ministry of Finance has published the final accounts for 2024/2025, showing a smaller budget deficit. It came in at 1.056bn dinars, or $3.46bn in the fiscal year to 31 March, narrower than projections of 5.6bn dinars, and was welcomed by the government.

The results—set out in detail below—represent progress in the management of government spending. They also strengthen the potential for raising adequate revenues while confirming efforts to rationalise expenditure on the main items of the state’s general budget

The improvement came after a rise in revenues, which reached 21.bn dinars, or $72.3bn. Oil revenues of 19.4bn dinars, or $63.5bn, exceeded estimates of 18.9bn dinars. Non-oil revenue reached 2.7bn dinars, up almost 28% year-on-year.

Revenue from taxes and fees increased by 10% over the previous budget, while revenue from goods and services rose by 36.53%. Expenditure fell to 23.1bn dinars, under the 24.5bn dinars expected.

AFP — Al-Ahmadi Oil Refinery, south of Kuwait City, March 10, 2022.

Revenues breakdown

Oil revenues: 19.4bn dinars

Non-oil revenues:

Taxes and fees: 606.48mn dinars

Goods and services: 1.97bn dinars

Social contributions: 111.95mn dinars

Sale of assets: 5.8mn dinars

Taxes and fees rose by 10% over the previous budget, revenue from goods and services by 36.5%, and social contributions by 0.33%.

Spending breakdown

The final accounts for 2024/2025 reveal the following breakdown of expenditure:

Total spending: 23.113bn dinars compared with the 24.5bn dinars forecast in the draft budget

Salaries and wages: 9.6bn dinars

Goods and services expenses: 3.38bn dinars; down by 1.28bn dinars

Subsidies: 1.12bn dinars; down by 144.38mn

Social benefits: 794.1mn dinars

Expenditures and transfers: 1.4bn dinars

Capital spending: 1.13bn dinars

Spending on grants was down by 584.4mn dinars, capital expenditure fell by 172.26mn dinars, expenditures and transfers were 81.5mn dinars lower.

Spending analysis

Cost-cutting measures, along with improved non-oil revenues, reduced the deficit by 32.4%. Public sector salaries remain the largest item on the budget, accounting for around 42% of total spending. It fell by only 90mn dinars year-on-year, underlining the difficulty the country has had in controlling this form of spending.

Thousands of Kuwaitis are hired annually in government agencies and departments because there are few suitable opportunities in the private sector, apart from limited posts in banks, investment companies, and a handful of large corporations.

The Small and Medium Enterprises Fund has also failed to provide jobs through the companies it financed, which were founded by Kuwaiti entrepreneurs.

Subsidies continue to represent a significant part of current expenditure, amounting to 3.38bn dinars, or 14.6%. They were reduced in 2024/2025 by an estimated 1.28bn dinars, signalling the government’s determination to reassess the importance of subsidies and how best to provide them to citizens without waste.

Public sector salaries remain the largest item on the budget, accounting for around 42% of total spending, followed by subsidies at 14.6%.

These subsidies cover foodstuffs, petrol and other fuels. A substantial portion goes towards subsidising electricity and water supplies, in addition to subsidies for housebuilding materials.

Capital spending remains modest, amounting to only 1.13bn dinars, or 4.8% of total expenditure. Kuwait is unable to allocate larger sums for capital spending for several reasons, chief among them the limited capacity and efficiency of government bodies to implement major projects.

Bureaucratic sluggishness, hesitancy in decision-making, and delays in disbursing funds to contractors all contribute to delivery setbacks. Large projects such as Kuwait International Airport and Mubarak Port remain unfinished despite government attempts to speed progress, including contracts with Chinese and Turkish companies.

Although capital expenditure does stimulate private-sector activity and commercial markets, the scale remains insufficient, whether on infrastructure or traditional government projects such as healthcare, roads, and education services.

For capital spending to create economically viable projects that generate income and contribute to GDP, public–private partnerships are essential, as are incentives for private-sector activity and encouragement of foreign direct investment. Such measures could expand revenues from taxes and fees, thus strengthening non-oil income.

AFP — A Kuwaiti man enteres the Kuwaiti stock exchange

Main economic driver

Kuwait's state budget is regarded as the main driver of economic activity. Household consumption by citizens and residents also depends heavily on government spending, especially salaries, wages, and subsidies for goods and services.

This reality raises serious concerns: how can spending at levels sufficient to preserve living standards and welfare be sustained when the oil sector accounts for 87.7% of total revenues and 83.9% of total expenditure?

This remains the central challenge for Kuwait's fiscal policymakers, despite their evident efforts over the past year and their relative freedom from the populist political pressures once exerted by many members of previous national assemblies.

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