The cabinet of OPEC member Kuwait has approved the 2012/2013 budget projecting a shortfall of 7.3 billion dinars ($26 billion), mainly through calculating oil income at a very conservative price.
Kuwait, which says it sits on 10 percent of global crude reserves, has projected a budget deficit every year for the past 13 fiscal years but has annually ended up with a healthy surplus, accumulating around $250 billion.
The budget, which started on April 1, will be issued by an emiri decree because parliament was dissolved on Sunday, Finance Minister Falah al-Hajraf said in a statement late Monday, cited by the official KUNA news agency.
The budget was delayed because of ongoing political crises between the opposition and the government and after the constitutional court scrapped the previous opposition-dominated parliament on June 20.
Under Kuwaiti law, the budget decree must be approved by the new parliament which has the power to reject it.
The budget projects revenues at 13.9 billion dinars ($47.7 billion), an increase of 3.7 percent from last year's estimated income but less than half of actual record income of 30.2 billion dinars ($107.5 billion).
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Spending is projected at a record 21.2 billion dinars ($75.6 billion), up 9.3 percent on last year's projections but almost 25 percent higher than last fiscal year's actual spending of 17 billion dinars ($60.5 billion).
The minister did not provide figures for oil revenue, which normally makes up 95 percent of total income, nor its price in the budget although former finance minister Mustafa al-Shamali had said it was $65 a barrel.
In 2011/2012 fiscal year which ended March 31, the Gulf state posted a record budget surplus of $47 billion despite projecting a huge deficit because it calculated oil income at $60 a barrel while the actual price was $110.
As a result, the cabinet decided last month to increase deductions in favour of Kuwait Fund for Future Generations from the normal 10 percent of revenues to as high as 25 percent.
The fund is managed by Kuwait Investment Authority (KIA), the emirate's sovereign wealth fund, which holds assets estimated at about $400 billion. Returns on the assets are not included in the budget.
Despite abundant cashflow, development has been stalled due to a chronic political crisis that has seen parliament dissolved on six occasions and the cabinet resign nine times since mid-2006.
The Gulf state adopts a cradle-to-grave welfare policy where a majority of citizens are employed by the government, receive handsome salaries, pay no taxes and receive services at low charges or for free.
Kuwait, with a native population of 1.2 million in addition to 2.5 million foreigners, pumps around 3.0 million barrels of oil per day.