Kuwait is bracing for a sharply wider budget shortfall, with the finance ministry projecting the fiscal deficit for the 2026-2027 year to climb 54.7 percent to 9.8 billion dinars (about $31.9 billion) as weaker oil revenue continues to strain public finances. The figures, set out in the draft budget presented by Finance Minister Yaqoub Al-Refaei on 11 February 2026, underline how heavily the Gulf state still leans on crude income even as officials push to broaden the revenue base.
The projection follows fresh confirmation that the deficit for the 2025-2026 fiscal year, which ended on 31 March 2026, widened 13 percent to 7.1 billion dinars (around $23 billion). Total revenue for that year came in nearly 10 percent below forecast, with oil revenue falling roughly 11 percent short of estimates. Government spending eased by almost 4 percent, but not enough to offset the drop in income.
What the 2026-2027 budget shows
The draft budget for the year running from 1 April 2026 to 31 March 2027 sets total revenue at 16.3 billion dinars, a 10.5 percent decline on the prior year. The breakdown reflects Kuwait’s central challenge:
- Oil revenue: budgeted at 12.8 billion dinars, a 16.3 percent contraction.
- Non-oil revenue: projected at 3.5 billion dinars, a 19.6 percent increase.
- Total expenditure: 26.1 billion dinars, with salaries and subsidies absorbing about 76 percent of the total.
- Capital spending: 3.1 billion dinars, or roughly 11.8 percent of outlays.
The budget is built on a conservative oil price assumption of $57 per barrel. Yet Kuwait’s fiscal break-even price, the level crude must reach for the budget to balance, stands at $90.5 per barrel, well above prevailing market prices. That gap is the core of the deficit problem, and it is why lower oil income translates so directly into a wider shortfall.
Where the money is going
Despite the squeeze, Kuwait is protecting a slate of major infrastructure commitments. The budget earmarks 318 million dinars toward named capital projects, including the Mubarak Al-Kabeer Port, the expansion of the Umm Al-Hayman wastewater treatment plant, the North Kabd station and the expansion of Terminal 2 at Kuwait International Airport. Allocations also cover a cancer control centre under the health ministry and equipment for the defence and interior ministries. The plan provides for 14,518 new public-sector positions.
The scale of that capital programme is set out in more detail in Kuwait’s wider spending plans for the year, part of a push to keep long-delayed development projects moving even as recurrent costs dominate the ledger. You can read more in our coverage of Kuwait’s 2026-2027 budget and its KD3 billion capital programme.
The push to diversify revenue
The 19.6 percent rise in projected non-oil revenue points to the direction of travel. Kuwait is preparing new levies expected to reshape its income mix over the coming years. A tax on large multinational companies and a set of so-called sin taxes are forecast to raise roughly $1.5 billion during the 2027-2028 fiscal year, which begins on 1 April 2027.
Those measures are central to a more optimistic medium-term outlook. The National Bank of Kuwait has forecast that the fiscal deficit could narrow to about 3 percent of GDP in 2027-2028, helped by the new taxes and an expected recovery in oil exports. That would mark a meaningful improvement from the current trajectory, though it depends on both the tax rollout and oil market conditions holding up.
The oil market backdrop
Kuwait’s fortunes remain tied to a volatile crude market. Seven OPEC+ members, Kuwait among them, agreed to raise combined oil output by 188,000 barrels per day from August, unwinding earlier production restraint. Higher volumes could support export income, but they arrive against a backdrop of soft prices, leaving the revenue outlook uncertain.
The pressure Kuwait faces is not unique to the emirate. Lower oil prices are testing budgets across the region even as the broader Gulf economy is expected to keep expanding, driven increasingly by non-oil activity. Analysts tracking the GCC’s projected economic growth of 4.4 percent in 2026 point to diversification as the key variable separating states that manage the oil downturn from those that struggle with it.
What it means
For Kuwait, the 2026-2027 budget is a study in contrasts. On one side, a deficit widening by more than half and a break-even oil price the market is nowhere near meeting. On the other, non-oil revenue climbing at nearly 20 percent, a firm commitment to infrastructure and a credible path, via new taxes, toward a much narrower shortfall by 2027-2028.
The near-term picture is undeniably difficult. But the composition of the budget suggests Kuwait is using the oil-price squeeze to accelerate the revenue reforms it has long debated. Whether that transition moves fast enough to keep pace with falling crude income will define the country’s fiscal story for the rest of the decade.
