Kuwait needs to urgently reduce its dependence on oil revenues and boost savings, despite its vast financial buffers and low levels of debt, the International Monetary Fund said on Monday.
Kuwait - a major oil exporter - saw its overall economic growth decline to 0.7% last year from 1.2% in 2018, as oil production cuts agreed with OPEC and non-OPEC partners weighed on its oil sector, the IMF said in a report.
The report, based on information available as of March 2, was prepared before the coronavirus outbreak became a pandemic, the Washington-based international lender said.
"It, therefore, does not reflect the implications of these developments and related policy priorities ... The outbreak has greatly amplified uncertainty and downside risks around the outlook."
Kuwait's fiscal financing needs, excluding investment income and discounting compulsory transfers to the country's Future Generations Fund (FGF), remained large at 7.7% of GDP in the fiscal year 2018-2019. Kuwait's fiscal year starts on April 1.
"The challenge to reduce dependence on oil and boost savings has become more urgent ... Kuwait has large financial buffers and low debt, but the window of opportunity to tackle its challenges from the position of strength is narrowing," the IMF said, citing subdued forecasts for oil revenues. Kuwait has lagged behind other Gulf states in introducing reforms aimed at diversifying its economy after oil prices dropped in 2014/2015.
Every year, the country deposits 10% of total revenue into the its sovereign wealth fund, FGF. "At current policies, the overall fiscal balance would turn into a growing deficit, which, after mandatory savings in the FGF, would give rise to large financing needs over the medium term," the IMF said.