Government spending rose by 40.1% year on year in the first nine months of fiscal year 2010/11 (April-March), largely because of sharply higher spending in the categories of goods and services and miscellaneous transfers. Increases in transfers and benefits, announced in February, kept spending growth strong in the final quarter of the year. Revenue growth was also strong in the final quarter of 2010/11 owing to higher oil production and prices. Our estimate for the budget surplus is now US$6.9bn, or 19% of GDP. In the medium term, Kuwait's fiscal policy is expected to remain expansionary. Capital expenditure is set to pick up given the urgent need for infrastructure improvements, and in order to meet the ambitious development goals outlined in the five-year plan. Current expenditure is also set to increase steadily as the government wage bill rises-assuming only limited success in replacing expatriate labour with nationals in the private sector-and as payments are made to the social security fund. Oil will continue to account for the bulk of budget revenue, as no new income or sales taxes are expected. Income from the foreign investments of the Kuwait Investment Authority is expected to increase steadily, although low global interest rates will constrain income in the first half of the forecast period. Overall, the budget surplus is set to narrow to just under 8% of GDP in 2015/16 owing to higher spending and declining oil prices from 2012.