As the markets are tanking, sending oil prices down due to fears that the US and other developed economies might face periods of slow economic growth (or a recession). Low oil prices raises a red flag in Kuwait, as concerns about the government budget start to rise.We did a simple “back of the napkin” calculation to get the price of oil that the Kuwaiti givernment budget breaks even.
We start with the expenditures. The budget forecasts an expenditure 0f KD 19.44 billion, or USD 71.45 billion. We subtract the non-oil revneus (electric bills, taxes, etc), which are forecasted to amount to KD 1.14 billion (or USD 4.18 billion), leaving us with USD 67.27 billion. We then add 10% of the needed oil revenues, as Kuwait allocates 10% of its oil revenues to the Future Generations Fund (managed by the KIA). The total oil revenue that Kuwait needs amasses to USD 74 billion. If we assume that Kuwait produces 2.5 million barrels per day, then the break even oil price would equal to $81.09, 20% below current prices.
So for the time being, the goverment budget will generate a surplus.
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