Friday 19 Jul 2019 | 18:51 | SYDNEY
Friday 19 Jul 2019 | 18:51 | SYDNEY

Habibi, can you spare a dime?


Rodger Shanahan


2 September 2008 13:19

While the conspicuous oil wealth of the Gulf states should no longer amaze us, it is sometimes worth examining how Gulf rentier states devise budgets for annual income based on such a fluctuating resource. In the case of Kuwait (which sits on an estimated 10% of the world’s oil reserves), the Ministry of Finance staff took a pretty conservative approach with its estimate of US$50 a barrel for FY 2008. Little wonder then that its $25 billion income for the first three months of this financial year represents more than 50% of the budgeted annual income. The Ministry was also a bit off with its FY 2007 estimates, with its actual $72.2 billion income a whopping 127% higher than forecasts.

 The regional outlook is similarly bullish, with estimates that the six GCC countries will reap some $562 billion in oil income this financial year. Little wonder then that Gulf sovereign wealth funds are an issue that causes some concern among Western countries, where fears are that governments may seek to invest their enormous surpluses for strategic rather than commercial interests. As this article points out, though, not all countries use sovereign investment funds in the same manner, and failure to appreciate this risks losing foreign direct investment for no good reason.