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Volume :2 Issue : 8 1976      Add To Cart                                                                    Download

ESSENTIALS OF ALTERNATIVE CONTINGENCY PLANS FOR GOVERNMENT EXPENDITURE: KUWAIT MODEL

Auther : By: Dr. Abdul Al-hamid Al-Ghazali

This study deals with an important policy question: that is, giving the fact that Kuwait public expenditure wholly depends on oil revenues, what would be the appropriate governmental measures, if these revenues, for any reason, suddenly and drastically fell? In helping to answer this question, the study attempts formulate some alternative patterns of public expenditure and suggests possible sources for their finance, according to given assumptions concerning oil production and revenues.

The formulation of the proposed patterns, in face of contingent conditions, naturally depends on the assumptions as well as the relative length of the period during which these conditions are expected to prevail.  The assumptions consist of eight levels of oil production, and revenues per annum, ranging from compete cessation – zero production and revenues – to levels which nearly reach the average annual level attained during the past three years.

As for the assumptions (A, B & C) which are nearly about the normal levels, the author finds no need for alarm.  Public expenditure can continue at its prevailing level, and hence the economy can work at its normal pace, without sacrificing, or even postponing planned developmental efforts.  But given the assumptions (D, E, F, G & S), the government must take action.  Any of these assumptions means a substantial decline, at an increasing rate from one assumption to another, in oil production and revenues.  This exceptionally abnormal situation will require specific and serious measures on the part of the government, concerning its expenditure and sources of finance .The necessity of public-expenditure-patterns formulation, and the need for adopting one of them, appears very clearly and urgent in the extreme case: that is the complete – cessation assumption, assumption (s).

With respect to public expenditure, the author sets three alternative patterns, all of which require the necessity of taking urgent exceptional – measures. These alternatives are:

1) a sizable decline in public expenditure to the recurrent obligatory commitments,
2) a continuation of the prevailing total public expenditure level, and
3) an implementation of planned developmental trend in total public expenditure.

As for the sources of finance, they will gradually and upwardly vary, in number and relative intensity of their usage, from the first alternative to the second, and then the third.

The author discusses each alternative in detail, in terms of the eight assumptions, the expected cuts, if applied, and the budgetary and other sources of finance.  He considers the third alternative – development pattern – as totally unrealistic, under the assumptions (D. E, F, G & S).  Then, he quantitatively compares three alternatives in terms of their feasibilities, measures, and deflationary impacts on the economy, if any, and how to overcome such tendencies.

In conclusion, the author emphasizes that the choice of one pattern should realistically be from the first two alternatives.  He also stresses that this choice should be finally based upon the existing international and external strategic and tactical considerations.

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