(MENAFN - Arab Times) Experts called Monday evening for changing the traditional way the budget was structured into a budget of programs and performances in order to address "structural" deficiencies and growing financial pressure on the general budget. The experts, at a seminar organized by the Arab Planning Institute about reality and challenges of financial policy in Kuwait, said the financial policies aimed at tackling economic problems. They said the finance ministry was responsible for adopting sound financial policy. Director of financial planning and budget at the finance ministry, Saleh Al-Saraawi, called for reconsidering expenditures in the state budget in order to address structural deficiencies. He explained that the state budget included the budgets of 29 ministries and government departments, as well as 14 affiliated and independent government bodies.
"The budgets of these bodies depend on the government backing and do not have the commercial shape in their structure," he said. One of the key structural deficiencies, he added, was complete dependence on oil as a major source of income, or 92 percent, and the rest were non-oil. The government, said Al-Saraawi, considered the growth of non-oil income to 17 percent in the coming years. However, reaching this objective needed many measures "and none was implemented so far," he added, like the failure of the state to levy taxes on citizens and low investment spending.
Al-Saraawi also noted that 43 percent of current expenditures were channeled to wages "which is considered a very high percentage compared with other expenditures." He said 27 percent of the budget were government subsidies, or KD six billion. Al-Saraawi said current spending levels required a 107 per oil barrel so the government could spend smoothly. He said high spending levels were coupled with accumulative deficit of KD 11 billion.
Meanwhile, Secretary General of Kuwait International Bank's Board Dr Sadeq Abul said the state's financial policy was not in its "correct" framework. Abul, also the Bank's economic research director, said the private sector used to shoulder all economic and commercial activities in Kuwait. But as of 1973, he added, government spending started to widen because of financial surpluses. The State's financial policies, he continued to say, then created new "consumption" habits. Abul said non-oil revenues resembled eight percent of overall income. "This is one percent of GDP and ... is extremely low." Abul said budget structural deficiencies started to appear clearly when wages sky-rocketed by around 200 percent over the past 10 years, while general spending surged by 300 percent over the same period. He said the state might take the risk, over the forthcoming years, to borrow from the general reserve or devalue the local currency.
For his part, professor of economics at Kuwait University (KU) Dr Abbas Al-Mejren said financial and economic reforms should be carried out in parallel. He said expansion in non-oil sectors like services, industry, agriculture and production "would not be effective" without backing of the oil sector. Al-Mejren said the state's spending on investment did not exceed 16 percent over the past 15 years, the lowest among the Gulf countries and developing nations. The professor called for diversifying income but to take into consideration the spending levels and the need to preserve suprluses. Dr Ahmad Al-Kawaz, an economist at API, said the financial policies aimed at addressing structural deficiencies in any local economy. He said the state should consider imposing direct taxes on companies and the value added tax (VAT), as well as boosting role of investment.
