44 ALRAQABA . ISSUE 18 the structural imbalances in the State’s general budget. Besides, the State merely relies on oil as the only dominant source of budget revenue. Given that oil prices are affected by a combination of factors- as clarified earlier, it is likely to trigger a funding risk and impede the implementation of the scheduled development plans. Main Findings and Recommendations on Public Debt Presented in SAB Reports (1)Findings: - Over the past three years, the State’s credit rating was downgraded several times by international credit rating agencies. - Findings of the State’s final accounts indicated ongoing fiscal deficits in Kuwait’s general budget from FY 2015/2016 to FY 2020/2021, amounting to a total of KD 34.780 million. - The total of debts contracted since the FY 2016/2017 amounted to KD 6258.45 billion; KD 2441.20 billion of the debt stock are foreign debts, and KD 3817.25 billion are domestic debts. - On 30/6/2021, the debt stock was brought down to KD 3391 billion (9.4% of Kuwait’s GDP), positioning Kuwait among the least indebted countries in the world. - From FY 2015/2016 to FY 2020/2021, a total of KD 42 billion has been drawn from the General Reserve Fund. - The validity period of Law 50/1987 and its amendments– a law allowing the government to seek public loans and carry out financing operations from local and international markets– expired on 28/3/2017. However, the State has not yet passed a law to authorize the government’s borrowing through domestic or foreign debt instruments. - The actual budget deficit in FY 2020/2021 was KD 10.8 billion, an unprecedented deficit since the one first recorded in FY 1990/1991 (the year of the Iraqi invasion of Kuwait). - Kuwait’s per capita debt is estimated at around KD 2484. - SAB expressed a reserved opinion regarding the public debt bill- a bill allowing the government to seek public debts and carry out financing operations from local and international markets- as certain technical aspects were disregarded as well as the risks associated with public debts. This opinion was presented in an official letter prepared by SAB in response to a request by the National Assembly to consider the matter on 15/7/2020. (2) Recommendations: - Investigate the causes for the drastic increase in the actual deficit constantly facing the State for more than five years; intensify efforts to generate more revenues and find new sources of budget income; and rationalize public spending, particularly current expenditures, to redress structural imbalances in the State’s general budget. - Avoid expanding debt financing, as borrowing shall not be resorted to as a durable solution to the State’s budget deficits. Instead, it is recommended to find a well-set strategy with plans and programs that would help the government to technically manage its public debt and ensure that the borrowed funds are channeled towards the areas in need of funding. - Urgently address the continuous decline in Kuwait’s credit ratings assigned by the international credit rating agencies to minimize the adverse consequences of such downgrades on the economic and global reputation of the State. Article Feature
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