Kuwait to ‘end sub­si­dies by 2020’

Oman: Gulf sin­gle cur­rency ‘in­evitable’

Kuwait Times - - FRONT PAGE -

Kuwait, un­der fi­nan­cial stress due to low oil prices, plans to end all forms of pub­lic sub­si­dies by 2020, a re­port pub­lished yes­ter­day said. A com­mit­tee set up by the fi­nance min­istry to re­view all pub­lic sub­si­dies said it plans to grad­u­ally re­duce sub­si­dies un­til it ends them com­pletely by 2020, ac­cord­ing to the re­port pub­lished by Al-Qabas news­pa­per. But in a tweet late yes­ter­day, the fi­nance min­istry de­nied it plans to end sub­si­dies.

Pub­lic sub­si­dies and so­cial aid are es­ti­mated in the cur­rent fis­cal year’s bud­get at over $3 bil­lion, about five per­cent of pro­jected spend­ing. The state has al­ready lifted sub­si­dies on diesel and kerosene which are be­ing priced ac­cord­ing to in­ter­na­tional oil price. In Septem­ber, Kuwait par­tially lifted sub­si­dies on petrol spark­ing a po­lit­i­cal cri­sis that led to the dis­so­lu­tion of par­lia­ment and calls for new elec­tions. The govern­ment had also se­cured the back­ing of the par­lia­ment be­fore it was dis­solved to raise elec­tric­ity and water prices paid by for­eign res­i­dents and busi­nesses, but ex­empted Kuwait cit­i­zens.

But the govern­ment agreed to com­pen­sate cit­i­zens for rais­ing petrol prices by of­fer­ing each driver some 75 liters (20 gal­lons) of petrol free of charge each month. The hike, rang­ing from about 40 to 80 per­cent de­pend­ing on the type of fuel, went into ef­fect on Sept 1 as part of re­form mea­sures to plug a bud­get deficit re­sult­ing from low oil prices. It was the first such in­crease since 1998. The OPEC mem­ber recorded a bud­get short­fall of KD 4.6 bil­lion ($15.3 bil­lion) in the fis­cal year which ended on March 31, ac­cord­ing to of­fi­cial fig­ures. Kuwait is pro­ject­ing a deficit of $29 bil­lion in this fis­cal year which started April 1.

Separately, the cre­ation of a sin­gle cur­rency in the Gulf re­gion has be­come in­evitable and is only a mat­ter of time, the ex­ec­u­tive pres­i­dent of Oman’s cen­tral bank was quoted as say­ing. Oman is not one of the coun­tries push­ing for a com­mon cur­rency, but “se­ri­ous mea­sures” are be­ing stud­ied to achieve it, the Saudi Ara­bian-owned Al Sharq Al-Awsat news­pa­per quoted Hamood San­gour Al-Zad­jali as say­ing in a state­ment.

Omani of­fi­cials were not im­me­di­ately avail­able yes­ter­day to com­ment on the re­port, and it was not clear whether Zad­jali’s re­marks sig­nalled any new mo­men­tum for the re­gion’s sin­gle cur­rency pro­ject. The cre­ation of mone­tary union be­came a pri­mary ob­jec­tive of the six mem­bers of the Gulf Co­op­er­a­tion Coun­cil in the early 1980s. Four of them Qatar, Saudi Ara­bia, Kuwait and Bahrain formed a joint mone­tary coun­cil and a fore­run­ner to a Gulf cen­tral bank in March 2010.

But the euro cri­sis and a lack of po­lit­i­cal will have slowed the pro­ject. Oman with­drew from the plan in 2006 and the United Arab Emi­rates pulled out in 2009. Many bankers in the re­gion say pri­vately that in­tro­duc­tion of a sin­gle cur­rency re­mains un­likely for the fore­see­able fu­ture, given tech­ni­cal dif­fi­cul­ties and the fact that GCC states are strug­gling with low oil prices, which are hav­ing vary­ing im­pacts on their economies. Saudi Ara­bia has slowed sharply and has been forced into painful fis­cal re­forms, while Qatar and Kuwait, with rel­a­tively strong state fi­nances, have come un­der less pres­sure. — Agen­cies

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