Kuwait’s huge cash re­serves al­low it to move ahead with re­forms: IMF

‘Cit­i­zens will un­der­stand’ bud­get ad­just­ment strate­gies

Kuwait Times - - LOCAL -

KUWAIT: In­ter­na­tional Mone­tary Fund’s Chief Chris­tine La­garde said in re­marks pub­lished yes­ter­day that Kuwait is priv­i­leged with enor­mous financial re­serves, which al­low the coun­try to con­duct grad­ual eco­nomic re­forms, es­pe­cially by di­rect­ing sur­pluses to pro­duc­tive spend­ing.

She added in an in­ter­view with daily news­pa­per Al-Qabas that there is a dire need for the gov­ern­ment to take se­ri­ous steps to­wards eco­nomic re­forms, es­pe­cially fol­low­ing the de­cline in oil prices, call­ing on the coun­try’s com­pe­tent author­i­ties to take the right mea­sures in in­creas­ing the non-oil rev­enues.

La­garde also called on the gov­ern­ment to im­pose taxes on com­mer­cial prof­its, as ex­tra prof­its are ex­pected, de­spite any low rates of taxes price, as “tax pay­ers ben­e­fit from the gov­ern­ment of­fered ser­vices, and thus should con­trib­ute to cov­er­ing costs.”

Financial re­form

Re­form­ing the pub­lic financial pol­icy is the key tool for ad­just­ing with the oil prices de­cline, La­garde said, stress­ing on im­por­tance of set­ting strate­gies to ad­just the gen­eral bud­get sit­u­a­tion. “The cit­i­zens would un­der­stand the rea­sons be­hind such financial mea­sures in the light of oil prices de­cline,” she af­firmed.

Kuwait bud­get reg­is­tered a deficit which is less than a num­ber of other Gulf Co­op­er­a­tion Coun­cil (GCC) coun­tries, and it is still ful­fill­ing financial sur­pluses de­spite the fall­ing oil prices, and has large financial re­serves, she said. Such re­serves should im­me­di­ately be in­vested in ex­pand­ing the non-oil rev­enues, and to re­or­ga­nize the na­tional eco­nomic struc­ture, she added.

She called on the GCC coun­tries to in­crease the di­ver­sity of eco­nomic ac­tiv­i­ties, as by 2020, a to­tal of two mil­lion cit­i­zens will en­ter the Gulf la­bor mar­ket, how­ever re­gard­ing the “gen­eral financial re­stric­tions that limit the em­ploy­ment op­por­tu­ni­ties in the pub­lic sec­tor, the pri­vate sec­tor should con­trib­ute in fac­ing such chal­lenge”.

Eco­nomic di­ver­sity

La­garde added that the di­ver­sity of eco­nomic ac­tiv­i­ties in the Gulf re­gion re­quires re­or­ga­niz­ing the avail­able in­cen­tives for com­pa­nies and na­tional work­force, in­di­cat­ing that in­vest­ment and good pro­duc­tion in the lo­cal mar­ket en­tails less risk and more prof­its for com­pa­nies com­pared to ex­ports.

The con­tin­u­a­tion of jobs avail­abil­ity in the pub­lic sec­tor leads to re­duc­ing any in­cen­tives to get­ting em­ployed in pri­vate sec­tor or es­tab­lish­ing per­sonal projects in the busi­ness sec­tor, she said. Kuwait needs to take ex­tra mea­sures to im­prove the busi­ness at­mos­phere and boost the com­pe­tence spirit, be­sides redi­rect­ing the gen­eral spend­ing and fol­low­ing up with the im­ple­men­ta­tion of la­bor mar­ket re­forms, she men­tioned.

Such re­forms will tackle the fuel prices, salaries, in ad­di­tion to war­ranted mea­sures such as in­creas­ing taxes on com­pa­nies, im­pos­ing added value taxes, be­sides fees on lands and real es­tate. La­garde will visit Kuwait this week to at­tend the World Is­lamic Fi­nanc­ing Con­fer­ence, which is or­ga­nized by the IMF in co­op­er­a­tion with Kuwait Cen­tral Bank, due next Wed­nes­day.

Chris­tine La­garde

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