A copy of the plan said 2.2 billion dinars would go on oil projects, while the remainder of the 5 billion would be spent on electricity, transportation, education, health and industrial projects.
The plan also envisages an additional 2.7 billion dinars in investments by the private sector on agriculture, construction, commerce, education, power generation and transportation.
In February, the OPEC member's parliament approved a 30 billion dinar four-year development plan aimed at decreasing the Gulf Arab state's dependence on oil, and boosting private sector participation in projects.
The plan also includes investment on raising oil and natural gas production. Government officials told Parliament the plan for the first year includes 885 projects.
Kuwait is the world's fourth-largest oil exporter.
Kuwait's Parliament also passed a law to set up shareholding companies to build new power and water desalination plants in the first privatization of the sector in the Gulf state.
Thirty-seven MPs, including Cabinet ministers, voted for the law while only three lawmakers opposed it in the second and final round of voting. It becomes effective after the emir signs it.
The legislation stipulates that 50 percent of the company shares will be sold to Kuwaitis in an initial public offering (IPO) and up to 24 percent will be held by the government and state institutions.
The remaining 26 percent will be auctioned to Kuwaiti firms listed on the bourse or foreign companies approved by the government.
The new companies will sell their production to the government based on contracts valid for 40 years. At least 70 percent of the company staff must be Kuwaiti, according to the legislation.
All five existing power and water desalination plants in Kuwait are owned and run by the ministry of electricity and water, which sells electricity and water at a heavily subsidized rate.
Kuwait has seen a sharp rise in power consumption over the past few years, but due to a lack of new projects to meet rising demand the emirate is now bracing itself for power cuts in the peak summer months when temperatures typically soar to around 50 degrees Celsius (122 degrees Fahrenheit).
Kuwait currently has a power production capacity of around 11,000 megawatts.
Last September, the Gulf state signed a $2.7 billion deal with General Electric and South Korea's Hyundai Heavy Industries to build its first new power plant in two decades.
The gas-fired plant at Subbiya, north of Kuwait City, will have 2,000 megawatts of generation capacity when it is fully operational in mid-2012.
Prime Minister Sheikh Nasser Mohammad Al-Ahmad Al-Sabah said in September that Kuwait aims to double its power generation capacity to more than 20,000 megawatts over the next five years.
The emirate's planned spending on power projects until 2015 is estimated at $27 billion.
The OPEC member, which operates a cradle-to-grave welfare policy for Kuwaiti nationals, sells power at highly subsidized rates to its 1.1 million citizens and 2.35 million foreign residents.
