The IMF also urged the Gulf state to speed up structural reforms, put back on track a $110 billion (81 billion euros) development plan that is lagging behind schedule and cut public subsidies.
"Reflecting the recent sharp increases in current expenditures and relatively small non-oil revenues, government expenditure in the baseline would exceed oil revenues by 2017/18, thus increasing the fiscal risk from a sustained drop in oil prices," said a report released late Monday.
Most of the sharp rise in spending was to finance increases in public wages and subsidies while capital spending continued to account for a small portion of public expenditure.
According to official figures from the finance ministry, between the fiscal years 2005/2006 and 2012/2013, public spending rose from $24.4 billion to $68.2 billion, during which government wages rose from $6.7 billion to $17 billion.
In the same period, oil income, which makes up around 95 percent of public revenues, rose from $45.9 billion to $106 billion.
High oil prices have benefited Kuwait by generating high fiscal and external current account surpluses, the IMF said.
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The country's gross domestic product is forecast to grow by just 0.8 percent in real terms in 2013, down from 6.2 percent last year, mainly because of a two-percent contraction in oil GDP.
Non-oil GDP is projected to grow by 3.0 percent this year, the IMF said.
Kuwait has boasted a budget surplus in each of the past 13 fiscal years, accumulating around $300 billion, whereas the size of its sovereign wealth fund has increased to over $400 billion.
But recent domestic political tensions have had an adverse impact on fiscal and economic affairs.
The implementation of the 2011-2014 Development Plan, a public investment programme, has lagged behind, the IMF said.
Kuwait has been hit by a chronic political crisis since 2006.
Parliament has been dissolved on six occasions and the cabinet has resigned nearly a dozen times.
Nominal GDP rose to $184.5 billion last year from $160.7 billion in 2011, said the IMF, which expected it to grow slightly this year and the next.