Delays In Approving Budgets Increase Project Costs

Economic sources say they are concerned that the delay in approving the new budget will have a negative impact on the economy, especially since most development projects in the country have slowed in terms of implementation since before the outbreak of the Covid-19 pandemic, owing to budget deficits that have accompanied the country's budget since fiscal 2014-2015 until the epidemic's repercussions.

Despite the fact that the indicators of recovery continue to improve, with the rise in oil prices heralding record surpluses for the current fiscal year, the delay in passing the budget and political turmoil will have a negative impact on major projects that are expected to be implemented in accordance with the development plan, due to the rapid changes that have occurred in the global economy, accompanied by rising inflation and increasing supply chain disruptions, as well as the ongoing repercussions of the Russian-Ukrainian war, reports a local Arabic daily.

All of these elements will surely drive up the cost of implementing projects by tens of millions, if not hundreds of millions of dinars, as well as wasting time and opportunity.

According to the sources, the country's slow rate of growth would have far-reaching consequences at several levels and sectors, which can be characterized as follows:

1 - Project costs are extremely high

Follow-up sources verified that the delay in starting government projects will result in a cost increase owing to rising inflationary pressures, both in terms of the raw materials required to complete these projects and in terms of the time it takes to execute them.

This is in addition to the fact that many companies and contractors rely on bank finances to provide the necessary liquidity, and after the high cost of loans in terms of interest, there is no doubt that companies will demand an increase in the value of contracts for pending projects, both current and future, and this necessitates expediting the general budget approval so that government agencies can complete the contracting procedures for their projects.

2. - Slowing down of progress

Several challenges have hampered the pace of development projects in Kuwait, lowering completion rates.

The delay in approving the new budget project is a primary cause of delays in the progress of government projects within the development plan, as well as their failure to fulfil deadlines, which has a negative impact on project achievement rates, lost time, and missed chances.

Although the Ministry of Finance stated in its disbursement circular that supervisory authorities should give priority to projects in the annual development plan if their procedures are completed quickly and the disbursement of these projects is done in accordance with the instructions in this circular, the postponement of these projects has occurred.

3 – Contractors' issues

Most building and construction contractors face issues such as high prices, supply chains, and labour shortages, and sources in the industry confirm that major contracting companies meet regularly to discuss realistic and practical solutions to ensure that projects are completed after the budget is approved, as well as to address financial and logistical obstacles that have arisen since the budget was approved.

Previously, a video was broadcast instructing local contractors not to complete any work during the present period owing to rising building material prices, which might result in severe losses if the contract is completed at the old pricing.

Many government agencies want to take on initiatives that will help them grow their businesses and provide digital and current technical services, but the time it takes to complete these projects is a roadblock to government development.

4 – Development efforts are terminated

Many government agencies want to take on initiatives that will help them grow their businesses and provide digital and current technical services, but the time it takes to complete these projects is a roadblock to government development.

5 – New employees

Failure to approve the ministries' budgets will halt new appointments in government agencies, resulting in an increase in the number of people waiting for government positions.

Government agencies are not permitted to sign new contracts for fiscal 2022/2023 before the National Assembly approves some budget sections or the issuance of the law linking the budget for the fiscal year, according to Ministry of Finance Circular No. 2 of 2022 regarding the controls of disbursement of government agencies until the issuance of the budget linking law.

According to government sources, the Ministry of Finance has taken steps to mitigate these effects, confirming in a circular that government agencies may take steps to offer the practises and tenders mentioned in the government entity's draught budget for the year 2022-2023 that the Finance Ministry has submitted to the National Assembly, provided that contracting procedures are not completed until after the end of the fiscal year.

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