Dis­count rate hike to boost com­pet­i­tive­ness of di­nar

Kuwait Times - - BUSINESS -

The re­cent de­ci­sion by the Cen­tral Bank of Kuwait (CBK) to raise the in­ter­est rate on the Kuwaiti di­nar by a quar­ter per­cent­age point to 2.50 per­cent from 2.25 per­cent, was much ex­pected and will en­hance the cur­rency’s com­pet­i­tive­ness, and lure as a sav­ing pot, bankers have agreed.

In sep­a­rate in­ter­views with KUNA, they ruled out any neg­a­tive im­pact on the na­tional econ­omy fol­low­ing the rise of the dis­count rate on the di­nar. The de­ci­sion was taken af­ter con­tin­u­ous mon­i­tor­ing by the CBK of the lo­cal eco­nomic, mone­tary and fi­nan­cial con­di­tions, Ex­ec­u­tive Di­rec­tor of the CBK’s Su­per­vi­sion Sec­tor Waleed Al-Awadhi told KUNA.

He added that the rais­ing of the dis­count rate was part of the CBK’s keen­ness on guar­an­tee­ing the com­pet­i­tive­ness and at­trac­tion of the di­nar as a sav­ing pot, be­sides fur­ther con­sol­i­dat­ing mone­tary and fi­nan­cial sta­bil­ity, as well as pro­vid­ing the var­i­ous eco­nomic sec­tors with sources of fi­nanc­ing. Re­fer­ring to the con­sum­ing loans, usu­ally for a five-year term, Al-Awadhi said the in­ter­est rate on them is fixed, and not li­able to be al­tered, even if con­di­tions are most likely to change in the fu­ture.

The in­ter­est rates on bor­row­ers be­fore the raise de­ci­sion took ef­fect as one De­cem­ber 15, will re­main un­changed, Al-Awadhi stressed. As for the long-term loans, 15 years, he pointed to the CBK’s 2008 rel­e­vant de­ci­sions, which pro­vided for a fixed in­ter­est for five years. Then, the bank has the right to re­view the rate so as to cope with de­vel­op­ments of the in­ter­est rate. But the rate will see a max­i­mum change of two per­cent, up or down, the CBK of­fi­cial said.

On his part, Board Chair­man of the Com­mer­cial Bank of Kuwait Ali Al-Mousa, ruled out any neg­a­tive ef­fect on the na­tional econ­omy af­ter the dis­count rate de­ci­sion. The de­ci­sion is one of the tools of the cen­tral bank to reg­u­late liq­uid­ity on the mar­ket, and mone­tary sta­bil­ity in gen­eral, he said. Al-Mousa pointed to the CBK’s ob­jec­tiv­ity and vi­sion­ary that have been rec­og­nized by in­ter­na­tional in­sti­tu­tions. It’s al­ways been the case that rais­ing the in­ter­est rate by a quar­ter per­cent­age point does not at all af­fect the na­tional econ­omy, he noted.

Al-Mousa said that the lend­ing sys­tem in Kuwait dif­fers com­pletely from that one ap­plied in the US, for in­stance, where a sim­i­lar step would put bor­row­ers off, which does not hap­pen here. For­mer head of the Kuwait Bank­ing As­so­ci­a­tion, and for­mer board chair­man of the Com­mer­cial Bank of Kuwait Ab­dul-Ma­jid AlShatti said that the ef­fect on the na­tional econ­omy would be very lim­ited. — KUNA

Ab­dul-Ma­jid Al-Shatti

Waleed Al-Awadhi

Ali Al-Mousa

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