Kuwait will increase its borrowing on international markets to plug a budget deficit resulting from low oil prices, the finance minister said yesterday. The move comes after the state raised $8 billion last month in its first international bond issue.
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“We will continue to be present in the international (debt) market but in a prudent, rational way,” Anas Al-Saleh told reporters at the Kuwait Financial Forum. “We will use all instruments, including bonds and (Islamic) sukuk. This will go side by side with enforcing reforms,” he said.
On top of its international bond sales, Saleh said the government had raised domestic debt worth KD 2.2 billion ($7.2 billion) in 2016-2017. The government also withdrew unspecified amounts from its reserves, estimated at $600 billion, to meet the budget deficit.
Saleh said the government put forward a bill allowing the state to borrow up to KD 20 billion ($65.5 billion) over the next five years. The minister told the forum that the government has succeeded in reducing the current expenditures and maintained the pace of investment spending to boost economic growth in the country.
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But Saleh warned that the government is not ready to continue borrowing to finance a budget deficit resulting from “consumption spending” and not spending on development.
After registering a healthy surplus for 16 consecutive years, Kuwait posted its first budget shortfall of $15 billion in the 2015-2016 fiscal year following a slump in oil prices. Kuwait projected a deficit of $29 billion in the 12 months to March 31.
The country is expecting a deficit of some $21.6 billion for the next fiscal year. Like other countries in Gulf, Kuwait has seen its main revenue stream hit hard by a prolonged drop in crude prices. An OPEC member state, it pumps around 2.8 million barrels per day.
Saleh said the government will soon discuss with the National Assembly “version 2” of its economic reform package, but declined to say if the new plan will include raising charges.
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Saleh said the ministry had held discussions with civil society organizations and this led to developing the economic reform package that was discussed by the previous Assembly. That package has come under harsh criticism by a majority of MPs in the present Assembly for envisaging hiking prices and reducing public subsidies.
Many MPs have called on the government to scrap the hike in petrol and electricity prices and have threatened to grill the prime minister if it failed to do so.
But Saleh said yesterday that the government will soon start discussing the new form of the reform package to approve it, adding that it focuses on reforms in the country. He declined to answer questions if the government will scrap the price hikes that have come under fire from lawmakers.
Opposition MP Abdulkarim Al-Kandari said two days ago that he was told by the finance minister that the government had suspended the economic reforms package.
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Meanwhile, MP Riyadh Al-Adasani said yesterday that he will file to grill the prime minister before May 3, when the constitutional court is due to issue a number of crucial rulings, including one that will determine the fate of the Assembly.
The lawmaker however said he may not file the grilling if the government succeeds in dealing with squandering of public funds and applies more strictly the replacement of expatriate employees with Kuwaitis.
Adasani said the financial condition of the state is very dire and corruption and negligence are the main sources of squandering public funds. He said that the government must diversify the sources of income. He also noted that the current Assembly will set the reforms package with the government and will not be a rubberstamp one like the previous Assembly.
By B. Izzak