Beirut, 14 January 2025--Kuwait is at a critical juncture in its economic journey, facing fundamental challenges in fiscal sustainability and the efficiency of social spending. A new report by the United Nations Economic and Social Commission for Western Asia (ESCWA), entitled "Social spending, expenditure efficiency and fiscal sustainability: strategies for rebalancing Kuwait's Budget", provides a critical analysis of current shortcomings and proposes reform steps to enhance the efficiency of the Kuwaiti economy.
The report shows that the country's public spending represents the equivalent of 50% of its GDP, well above the global average of 37%. However, the management of this spending lacks efficiency, with Kuwait scoring 0.54 on the efficiency index compared with a global average of 0.74. The report indicates that improving efficiency to reach this average could achieve financial savings estimated at 6.8 billion Kuwaiti dinars, or about 27% of the State's public spending for the year 2023/2024.
Education and health under the microscope
With regard to social spending, which consumes 44% of the total public budget, the report records a decline in the per capita share of this spending by 12% since 2018/2019. It also indicates that the education sector, which accounts for 12% of the public budget, is still lagging behind international standards, despite the large spending that has been allocated over the years. In the health sector, the high level of public spending has not contributed to addressing health challenges, as about a quarter of the population in Kuwait suffers from diabetes, indicating an urgent need to improve the effectiveness of these expenditures.
Imbalance in the distribution of government transfers
The report highlights problems in the fairness of the distribution of government transfers to individuals, as the wealthiest families benefit by 22% of the total transfers due to the absence of effective targeting mechanisms. It recommends rationalizing transfers to middle- and low-income households, which in turn would provide significant financial resources to be redirected towards the most needed development sectors.
Road map for reforms
The report calls for implementing comprehensive financial reforms to boost the Kuwaiti economy, most notably diversifying the economy by strengthening non-oil sectors and supporting the private sector. It also stresses the need to improve non-oil revenue collection mechanisms and adopt performance-based budgets and digital platforms to improve transparency and enhance efficiency.
Improving public services
The report also stresses the importance of developing public services, emphasizing investment in preventive healthcare and modernizing medical infrastructure. It also recommends improving education through teacher training and developing curricula, in addition to expanding research initiatives to support long-term economic and social goals.
In this context, the report's author, Niranjan Sarangi, affirmed: "Kuwait needs to act immediately. Implementing targeted financial reforms is not an option but a necessity to protect the economy and ensure the well-being of citizens."
Sustainable Development Goals at the heart of reforms
The report also indicates that aligning Kuwait's financial strategy with the United Nations Sustainable Development Goals is crucial to achieving long-term economic stability. Implementing these reforms could improve Kuwait's ranking in global indicators, such as the Human Development Index and the Sustainable Development Goals Index, putting it in a better position to achieve its economic and development aspirations..
