Al-Shal Report: Headlines on the launch of financial and economic reforms are nothing but a mirage

The Al-Shal Economic Report considered it unlikely and contradictory to all the stated goals of financial reform for the actual budget deficit to rise from approximately KWD 1.056 billion in the final accounts for the fiscal year 2024/2025 to approximately KWD 7.141 billion in the final accounts for the fiscal year 2025/2026, representing an increase of about sevenfold.

The report attributed the excess of the final accounts deficit over the estimated budget deficit by approximately KWD 1.6 billion, largely to the complete halt of Kuwait’s oil exports in March, the final month of the previous fiscal year.

The report noted that the Ministry of Finance issued a statement regarding the figures in the final accounts for the previous fiscal year 2025/2026. The statement indicated that actual revenues amounted to KWD 16.457 billion, which is lower than the budgeted estimate of KWD 18.231 billion by approximately KWD 1.774 billion, or about 9.7%. Total actual expenditures reached approximately KWD 23.598 billion, representing a saving of about KWD 940 million compared to the budgeted estimate of KWD 24.538 billion, or a saving of approximately 3.8%.

The report pointed out that what is more important are the differences between the figures in the final accounts for the fiscal year 2024/2025 and those for the previous fiscal year 2025/2026, as the discrepancies between the two sets of accounts provide the definitive judgment on whether the financial reform agenda, public finance sustainability, and the recurring claims that Kuwait is steadily progressing toward achieving the goals of the Kuwait Vision 2035 are valid or not.

Al-Shal’s report clarified that the first indicators of financial reform begin with the figures in the general budget. The approved general budget featured a deficit six times larger than the actual deficit in the final accounts of the preceding general budget. Given that the budget adopted conservative revenue estimates, it was expected that the deficit figures in the final accounts would be lower, which did not happen.

The report further explained that an examination of certain expenditure details in the final accounts reveals an increase in the share of current and inflexible spending. While the share of capital expenditures declined to approximately 7.54%, the share of current expenditures rose to approximately 92.46%, of which about 81.45% was allocated to salaries and subsidies. This is noted without delving into the economic return on those capital expenditures. In the near future, a new line item will appear on the expenditure side of the general budget for servicing the rapidly growing public debt, including principal installments and interest. Most of the proceeds from these loans will be spent to cover a budget deficit characterized by predominantly current, growing, and inflexible expenditures with no economic return. This is a risk we have repeatedly warned about, or alternatively, it provides an easy source of funds for a government lacking a work program or a developmental recovery plan that could prevent the country from falling into a debt trap.

Al-Shal emphasized that “the headlines suggesting the start of structural financial and economic reforms are nothing but a mirage, and the government’s official figures decisively refute this. In reality, the current trajectory is the opposite of reform, reflecting the record-high dependence of the domestic economy on a single source of income: oil.”

The Kuwait Clearing Company issued its report on “Trading Volume in the Official Market for the period from January 1, 2026, to June 30, 2026,” published on the Kuwait Stock Exchange website, categorized by the nationality and category of traders. The report indicated that the institutional and corporate sector remains the largest participant, with its share increasing. It accounted for 67.2% of the total value of shares sold (compared to 62% for the same period in 2025) and 66.6% of the total value of shares bought (compared to 64.2% for the same period in 2025). This sector sold shares worth KWD 6.746 billion, while buying shares worth KWD 6.684 billion, resulting in the highest net selling position of approximately KWD 61.306 million.

He noted that the second-largest contributor to market liquidity is the individual investors segment, whose share has declined. Individuals accounted for 30.3% of the total value of shares purchased (33.9% in the same period of 2025) and 29.6% of the total value of shares sold (35.9% in the same period of 2025). Individual investors purchased shares worth 3.039 billion dinars, while selling shares worth 2.965 billion dinars, resulting in a net buying position of approximately 74.562 million dinars.

He explained that the third-largest contributor is the client accounts (investment funds) segment, whose share has increased. This segment accounted for 2.6% of the total value of shares sold (1.6% in the same period of 2025) and 2.6% of the total value of shares purchased (1.3% in the same period of 2025). The segment sold shares worth 262.578 million dinars, while purchasing shares worth 261.52 million dinars, resulting in a net selling position of approximately 1.052 million dinars.

He pointed out that the final contributor to market liquidity is the investment funds segment. This segment accounted for 0.6% of the total value of shares sold (0.5% in the same period of 2025) and 0.5% of the total value of shares purchased (0.5% in the same period of 2025). The segment sold shares worth 59.210 million dinars, while purchasing shares worth 47.006 million dinars, resulting in a net selling position of approximately 12.204 million dinars.