Kuwait’s finance minister is trying again to win swift parliamentary support for an economic and fiscal reform program, saying that a critical state fund would remain a “concern” even if oil prices were to jump to $100 a barrel.
The General Reserve Fund, where all revenue is deposited, “is under pressure due to growing budget expenditure and a low oil-price environment in recent years,” Nayef Al-Hajraf told lawmakers in a closed meeting on Sunday.
He urged the assembly to accept its “shared responsibility” and pass reform plans, including a draft law enabling the government to issue debt of as much as 25 billion dinars ($83 billion) on international and local markets.
For more than a decade, Kuwait’s attempts to revamp its economy haven’t moved beyond a blueprint amid domestic political opposition. Like other regional economies, it has sought to better manage subsidies and plans to introduce taxes to plug a budget shortfall triggered by the slump in oil prices. But as the price of crude has risen above $70, there are concerns enthusiasm for an economic overhaul may again wane.
In an interview with Bloomberg this year, the eldest son of Kuwait’s ruler said the second-richest Arab nation had in the past lacked a vision for change, but that was no longer the case. “Now we are changing for a reason,” Sheikh Nasser Sabah Al-Ahmad Al-Sabah said.
Kuwait ran up a total budget deficit of 14.6 billion dinars in the three full financial years after oil prices began to drop sharply in 2014. The shortfall was funded from the general reserve, in addition to almost 4.8 billion dinars borrowed at home and overseas, Al-Hajraf said in February.
The fund’s assets totaled about 26.4 billion dinars as of March 31, he said in the statement issued after Sunday’s meeting, equally comprised of cash and equivalents, and non-liquid investments. Data on the size of the reserve in earlier periods isn’t publicly available.
The reserve fund each year transfers 10 percent of its assets to the Future Generations Fund, which invests outside of Kuwait. Both funds are managed by the Kuwait Investment Authority.
“The FGF continues to grow while the liquidity in the GRF is on its way to depletion,” Al-Hajraf said.
The government has proposed raising spending for the 2018/19 fiscal year to 21.5 billion dinars. The state budget is scheduled to be approved by parliament later this month. Wages and subsidies account for more than 70 percent of outlays.
Kuwait, often seen as the most democratic of the six Gulf states, has witnessed tumultuous relations between the elected parliament and the government appointed by the country’s hereditary emir. There have been seven governments in as many years and parliament has been dissolved numerous times.
Lawmakers are now again voicing resistance to supporting bills that could make Kuwaitis poorer, with many ardently opposed to the implementation of new taxes, such as those introduced by Kuwait’s Gulf neighbours. Nor do they want the government to borrow.