Kuwait is committed to achieving economic sustainability, encompassing environmental, social, health, and economic aspects, which includes price stability (inflation). Inflation arises mainly from excess demand (demand-pull), supply shocks (cost-push), or monetary expansion. Using a Vector Error Correction Model and monthly data from 2010 to 2022, this study examines Kuwait’s inflation determinants, focusing on internal factors (government expenditures, money supply) and external variables (nominal effective exchange rate, trade partner prices). The findings challenge Keynesian assumptions, revealing a significant negative long-run relationship between government spending and inflation, suggesting that fiscal policy absorbs rather than exacerbating inflationary pressures. External factors, such as imported inflation, have limited influence due to Kuwait’s pegged exchange rate regime. Short-run analysis highlights the critical roles of money supply and government spending, underscoring the importance of coordinated fiscal and monetary policies. These findings provide practical guidance for policymakers planning to reduce government expenditures, emphasizing the importance of carefully managing expenditure reductions and controlling money supply growth to maintain price stability.