* Spending soars over 50 pct in first half
* Most of rise due to current expenditure, not investment
* May partly reflect payments' timing, not annual
* Impact on domestic demand not as large as figures suggest
* But figures underline growing pressure on state finances
By Sylvia Westall
KUWAIT, Jan 5 Kuwait's budget surplus narrowed
in the first six months of its fiscal year as spending soared
over 50 percent, partly thanks to increased outlays on public
sector wages, while oil revenues fell, figures from the Finance
The budget surplus for April to September was 10.72 billion
Kuwaiti dinars ($37.9 billion), a Reuters calculation based on
official data showed. That was down 15 percent from 12.65
billion dinars during the same period a year earlier.
Although Kuwait's fiscal position is still strong because of
its oil wealth, the International Monetary Fund has told the
government that it will need to invest in infrastructure
projects and control public wage growth to strengthen the
economy and maintain a healthy balance sheet.
Kuwait's prime minister echoed the IMF in October when he
described the country's expensive welfare system as
unsustainable and said the government needed to cut spending and
consumption of natural resources.
Six-month state expenditure reached 5.10 billion dinars, up
52 percent from 3.36 billion dinars a year earlier, the figures
showed. Revenues fell to 15.82 billion dinars from 16.01 billion
dinars because of a decrease in the oil price.
National Bank of Kuwait, the country's biggest commercial
bank, said in a report that the jump in spending was mostly due
to current expenditure such as wages, rather than to investment.
Part of the increase may be due to the timing of some
payments rather than to any increase in allocations over the
full fiscal year, so spending growth is expected to moderate
considerably by the end of 2013/2014, NBK said.
It added that much of the first-half spending surge
apparently involved governmental transfers that would not affect
the real level of demand in the economy, so the figures did not
necessarily mean a huge boost to economic growth.
Kuwait pledged $4 billion in aid to Egypt after the
overthrow of Islamist Egyptian President Mohamed Mursi in July,
and quickly began disbursing that aid.
Nevertheless, the spending and revenue numbers are in line
with the IMF's warning that if Kuwait does not curb spending
growth, government expenditure could exceed oil revenues by
2017/18, raising the risk of budget deficits.
Although senior government officials are discussing that
risk, it is not clear whether they have the political freedom to
Kuwait's fractious political system has made it difficult
for the government to push through economic reforms that are
unpopular with voters. Any government attempt to cut subsidies
for citizens or curb public wage growth could cause a backlash
in parliament from lawmakers who support raising benefits, and
possibly set off public sector strikes.