RIYADH: Kuwait recorded an actual budget deficit of 1.06 billion dinars ($3.46 billion) for the 2024-2025 fiscal year ending March 31, significantly lower than the projected shortfall of 5.6 billion dinars.

According to Reuters, citing data published in the official gazette Kuwait Al-Youm, total actual revenues reached 22.06 billion dinars, surpassing the estimated 18.9 billion dinars. Of the total, 19.36 billion dinars were derived from oil income.

This comes as government spending came in at 23.11 billion dinars, lower than the 24.5 billion dinars initially forecast in the state budget plan.

Economic researcher Mohammed Ramadan said the lower-than-expected deficit was “normal,” attributing it to Kuwait’s conservative approach to budgeting, Reuters reported.

“The government usually underestimates revenues and overstates expenditures, which makes the projected deficit appear somewhat exaggerated,” he said.

“Unfortunately, this policy leads the government to spend less than it should, which in turn reduces investment in development projects that grow more expensive over time due to inflation and other factors,” he added.

Total expenditures declined by nearly seven percent compared to the previous fiscal year, when spending stood at 23.64 billion dinars.

Ramadan said the decrease was primarily due to reduced allocations for grants. 

These typically include support for foreign countries, international organizations, and some domestic institutions.

He also noted a reduction in the goods and services category, which encompasses a wide range of operational spending. 

“This indicates a broad reduction in government spending across many items in this category,” he said.

In February, the government approved the draft budget for 2025-2026, projecting the deficit to widen by 11.9 percent to 6.31 billion dinars.

The draft, which still requires final approval by Emir Sheikh Meshal Al-Ahmed Al-Sabah, expects revenues to drop to 18.2 billion dinars, while expenditures are set at 24.5 billion dinars.

Kuwait’s economy saw a 3 percent contraction in 2024 according to official data published in May, which also showed the contribution of non-oil sectors to GDP increased by 3.7 percent during the 12-month period.

Despite the forecasted full-year deficit, Kuwait posted a surplus of 150.4 million dinars during the first half of the 2024-2025 fiscal year, according to Ministry of Finance data published in November. The surplus was driven by higher revenues and reduced spending.