A combination of political and economic factors has placed Kuwait in a quandary. Allegations of corruption against the country’s finance minister could lead to the resignation of the government, while a drop in both oil prices and oil production levels has had serious economic ramifications.
Recent political events demonstrate that Kuwait is facing a parliamentary crisis. On Sunday, Minister of Information and acting Oil Minister Sheikh Ahmed Al-Fahd Al-Sabah stated that the filing of a vote of no confidence against Finance Minister Yousef Al-Ibrahim contradicts the country’s parliamentary principles. The following day, the foreign minister backed Sheikh Ahmed and promised that the government would resign if parliament voted out the state’s finance minister over alleged mishandling of public funds.
The finance minister has faced heavy criticism over recent political appointments and the performance of the Kuwait Investment Authority, which manages $65 billion in overseas investments. The US-educated Al-Ibrahim has also been accused of failing to carry out reform in bodies under his authority. Fearing corruption, several MPs have blocked plans by Al-Ibrahim to put 50 percent of the billions of dollars of Iraqi compensation payments into an independent fund for infrastructure projects.
This most recent political calamity comes at a time in which Kuwait’s economy has been severely weakened by unstable oil prices. Last year, the average price of Kuwaiti crude fell to $21.75 per barrel from $25.73 in 2000, while the state’s average oil production dropped in 2001 to 2.004 million barrels per day (bpd), down from 2.103 bpd the previous year.
A combination of these factors has led to a 987 million Kuwaiti dinar ($3.2 billion) decline in oil exports. With oil accounting for 93 percent of Kuwait’s exports, the country’s current account surplus has fallen by 41.7 percent to KD2.626 billion ($8.59 billion). Moreover, falling oil revenues, combined with rising budget expenditures, will cause the Kuwaiti budget deficit to reach $6.1 billion in the upcoming year.
In spite of a 0.5 percent rise in non-oil income last year, Kuwait’s nominal GDP (Gross Domestic Product) still plunged by 8.5 percent, as compared to a 33 percent rise the previous year. This weakening has also affected the average citizen; per capita income declined in 2001 from KD5,656 ($18,490) to KD4,949 ($16,179).
The most recent political events are a reflection of a more general power vacuum that has evolved since January’s major oilfield explosion at the Raudhatain oilfield, which caused the resignation of the previous oil minister. Since then, the government has been unable to find anyone willing to takeover the running of one of the most important portfolios in the country, reflecting a paralyzed decision-making process. Similar political crises have in the past led a decline in the local stock market and economic stagnation, and it appears as though a similar pattern is now unfolding. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
