Kuwait to ‘end subsidies by 2020’
Oman: Gulf single currency ‘inevitable’
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