The State of Kuwait is a small rich oil-based economy characterized by dominance of the large public sector in major economic activities. Such imbalanced structure has limited the role of the private sector in economic activities and has adversely affected economic growth. Based on the review of international experience in private sector development, this paper aimed to substantiate the impact of both private and public sectors growth on economic performance. Analysis of Kuwait's public expenditures verified the public sector dependency on oil revenues and inefficient utilization of resources. The theoretical review revealed a positive direct relationship between high GDP growth rate and the increased role of the private sector in the economy. Moreover, the review of recent transitional economies experiences in constructive economic transformation can be considered as an evidence of a rapid effective private sector growth. Finally, the analysis also demonstrated that Kuwait's public sector expenditures depict a rent seeking behaviour that has negatively impacted the society welfare.