Kuwait can’t pay salaries beyond October, minister tells parliament


Bloomberg, 19-08-2020 20:14:57


Write Comment     |     E-Mail To a Friend     |     Facebook     |     Twitter     |     Print


Kuwait can’t pay salaries beyond October, minister tells parliament

Government is withdrawing from its General Reserve Fund at rate of 1.7b dinars a month

Kuwait City: Kuwait has 2 billion dinars ($6.6 billion) worth of liquidity in its Treasury and not enough cash to cover state salaries beyond October, Finance Minister Barak Al Sheetan warned parliament, as political wrangling again delayed efforts to return to international bond markets.

The government is withdrawing from its General Reserve Fund at a rate of 1.7 billion dinars a month, meaning liquidity will soon be depleted if oil prices don’t improve and if Kuwait can’t borrow from local and international markets, he said.

Managing the crisis has proven especially challenging for Kuwait, where all laws must be approved by lawmakers who accuse the government of mismanaging public money and are blocking legislation that would allow it to borrow abroad.

The minister’s dire projection came as the house discussed a report from the finance and economic committee, which rejected draft legislation that would have allowed the government to issue bonds. Parliament on Wednesday decided to refer the debt law back to the finance panel so it can present a new report in two weeks, when the chamber will take a vote.

"Had we implemented this law in 2017, we wouldn’t be where we are today," Al Sheetan told lawmakers in reference to the debt law. After a debut Eurobond issuance in 2017, the law lapsed, rendering the government unauthorized to sell more bonds. It has been looking for approval from parliament to borrow as much as 20 billion dinars.

Lawmakers approved a bill to temporarily halt the transfer of 10 per cent of revenue to the Future Generations Fund in years when the government runs a deficit. Designed as a buffer for when Kuwait’s oil reserves run out, the fund is managed by Kuwait Investment Authority, the world’s fourth-largest wealth fund.

Should it fail to win approval of the debt bill, the government will have the option of possibly seeking to issue the law by decree once the current legislature’s term ends ahead of elections later this year.

"There are real justifications for rejecting the public debt law," lawmaker Adnan AbdulSamad said ahead of expected votes Wednesday on both the debt law and the halting of the 10 per cent revenue transfer. "It’s difficult to approve the public debt law without budget reform."

Wages and subsidies

Kuwait’s budget deficit increased 69 per cent to 5.64 billion dinars in the last fiscal year, and the government estimates it’ll more than double to 14 billion dinars in the current fiscal year, ending March 31, Al-Sheetan said. Wages and subsidies accounted for 76 per cent of all spending. The International Monetary Fund expects the government’s financial needs to grow at a rapid rate as its liquidity position weakens.

In March, S&P Global Ratings put Kuwait’s sovereign rating on negative watch, and Moody’s Investors Service followed. The IMF said that month that while Kuwait has large financial buffers and low debt, its "window of opportunity to tackle its challenges from the position of strength is narrowing."

In June, Sheikh Sabah Al Ahmed Al Sabah, Kuwait’s ruler, issued a call to transform the economy to one less reliant on oil and urged rationalising spending. More than 90 per cent of the country’s revenue is generated from oil.

Other Gulf states facing similar predicaments have come to count more on borrowing, and S&P analysts say the region will borrow a record amount this year. Saudi Arabia, Bahrain and Qatar have all largely relied on debt to cover their deficits.

" In the medium to long-term, in the absence of borrowing, more austerity measures will have to be applied to public spending," Al Sheetan said. "In several decades, the FGF will run out, affecting the welfare of citizens and the state."

Write your Comments on this Article
Your Name
Native Place / Place of Residence
Your E-mail
Your Comment   You have characters left.
Security Validation
Enter the characters in the image above
    
Disclaimer: Please write your correct name and email address. Kindly do not post any personal, abusive, defamatory, infringing, obscene, indecent, discriminatory or unlawful or similar comments. Kemmannu.com will not be responsible for any defamatory message posted under this article.
Please note that under 66A of the IT Act, sending offensive or menacing messages through electronic communication service and sending false messages to cheat, mislead or deceive people or to cause annoyance to them is punishable. It is obligatory on kemmannu.com to provide the IP address and other details of senders of such comments, to the authority concerned upon request. Hence, sending offensive comments using kemmannu.com will be purely at your own risk, and in no way will Kemmannu.com be held responsible.
Similarly, Kemmannu.com reserves the right to edit / block / delete the messages without notice any content received from readers.




Welcome to Thonse Naturecure Hospital
View More

Billawa Legend Jay C. Suvarna EXPIREDBillawa Legend Jay C. Suvarna EXPIRED
Obituary: Mercine Lewis (94). Baligere Kudru, KemmannuObituary: Mercine Lewis (94). Baligere Kudru, Kemmannu
Unbelievable Stunts on Beach by local boys| Freestyle Jumps | India | Udupi | KemmannuUnbelievable Stunts on Beach by local boys| Freestyle Jumps | India | Udupi | Kemmannu
The Tablet - International Catholic WeeklyThe Tablet - International Catholic Weekly
GSB delicacies at Hotte Thumba Fish Court UdupiGSB delicacies at Hotte Thumba Fish Court Udupi
Rozaricho Gaanch September Issue 2020Rozaricho Gaanch September Issue 2020
Contact on Going Residential ProjectAl Nayaab Residency, UdupiContact on Going Residential ProjectAl Nayaab Residency, Udupi
Computerised Clinical Laboratory, Kemmannu.Computerised Clinical Laboratory, Kemmannu.
Milarchi Lara - Bulletin Issue July 2020.Milarchi Lara - Bulletin Issue July 2020.
Choice Furniture vast household showroom opens at Santhekatte, KallianpurChoice Furniture vast household showroom opens at Santhekatte, Kallianpur
Focus Studio, Near Hotel Kidiyoor, UdupiFocus Studio, Near Hotel Kidiyoor, Udupi
Canara Beach Restaurant, Hoode/Bengre, Udupi.Canara Beach Restaurant, Hoode/Bengre, Udupi.
Delite Catering, SanthekatteDelite Catering, Santhekatte
St. Alphonsa of India