(MENAFN - Arab Times) Latest public finance data show a significant boost in government spending in November. This may be linked to a correction of under-reporting issues, which likely underestimated actual spending in previous months. Nevertheless, the headline rate of spending remains low relative to previous years. The rise in reported spending has capped large monthly increases in the budget surplus, despite soaring oil revenues.
Increases in the budget surplus have slowed significantly as a result of the recent acceleration in spending. The surplus for the first 8 months to November stood at KD 14.7 billion before allocations to the Reserve Fund for Future Generations (RFFG), little changed from the previous month. This surplus is equivalent to 30% of annual 2012 GDP. With reported spending likely to accelerate even further in the remaining 4 months, we expect the final budget surplus for FY 2012/13 to close at around KD 12.0 billion. (Chart 1.)
Total revenues for the first 8 months of the fiscal year (April-November) reached KD 21.6 billion, on the back of soaring oil revenues. The 15% y/y rise in oil receipts, however, is stronger than expected given a 1% decline in Kuwait Export Crude prices and a 10% increase in oil production over the same period. (Chart 2). Non-oil revenues were also up by some 18% y/y to around KD 1.1 billion.
Government spending climbed to KD 6.9 billion in the 8 months to November, equivalent to one-third of the amount budgeted for the entire year. Total spending surged by KD 2.7 billion from October, with the year-on-year decline in spending slowing considerably to 3% compared to 31% at the end of the previous month. Nevertheless, a large part of the increase in spending during the month likely reflects the pick-up in reporting, rather than a fundamental acceleration in the rate of spending.
The rise in spending came almost entirely from current expenditures, which are now down only slightly year-on-year. Current spending leapt to KD 6.3 billion in November from KD 3.8 billion at the end of the previous month. The biggest driver was the 'wages & salaries' component which, after appearing weak in previous months, is now up by some 25% y/y - largely on the back of a rising Ministry of Education wage bill.
Meanwhile, capital spending continued to disappoint, reaching just under KD 0.6 billion in the 8 months to November, KD 0.1 billion lower than a year ago. Almost three-quarters of this decline was the result of reduced investment spending by the Ministry of Electricity and Water. On a brighter note, the rate of capital spending has gathered pace, reaching 22% of the full-year budget, up from 16% a month earlier. Yet this is still low in comparison to the 5-year historic average of 31% over a similar 8-month period. (Chart 3.)