Govt with­drew KD 28.5bn in 3 years amid oil slump

Fu­ture gen fund main ben­e­fi­ciary Fi­nance min­istry mulls im­pos­ing VAT

Kuwait Times - - FRONT PAGE - By B Iz­zak

The gov­ern­ment has with­drawn KD 28.5 bil­lion from the gen­eral state re­serve over the past three fis­cal years start­ing from the 2014/2015 fis­cal year, Fi­nance Min­is­ter Anas Al-Saleh said yes­ter­day. The min­is­ter said in a re­ply to a par­lia­men­tary ques­tion that KD 9.64 bil­lion was with­drawn in 2014/2015 and KD 11.47 bil­lion in 2015/2016, while KD 7.46 bil­lion was with­drawn in the past fis­cal year, the min­is­ter said. The with­drawal co­in­cided with the start of a sharp drop in the price of oil, whose rev­enues made up around 95 per­cent of to­tal pub­lic rev­enues be­fore the slump in oil in­come.

But the min­istry of fi­nance later ex­plained that only a small por­tion of the with­drawn funds were used to fi­nance the bud­get deficit. A spokesman for the min­istry said the bulk of the funds, or KD 15.55 bil­lion, were in­jected into the Re­serve Fund for Fu­ture Gen­er­a­tions, from which the law for­bids any with­drawals. A min­istry spokesman said KD 5.74 bil­lion was used to fi­nance the bud­get deficit of 2016/2017, while KD 1.4 bil­lion was used to pay for a short­fall at the pen­sion agency. The re­main­ing funds of KD 5.1 bil­lion were with­drawn in the 2015/2016 fis­cal year, he said.

In a re­lated de­vel­op­ment, Saleh said the min­istry of fi­nance is con­sid­er­ing the im­ple­men­ta­tion of value added tax (VAT) on cer­tain sec­tors, but is study­ing mea­sures to min­i­mize its im­pact on cit­i­zens. He said the min­istry is study­ing al­ter­na­tives to safe­guard low-in­come peo­ple from the neg­a­tive im­pacts of ap­ply­ing the eco­nomic re­forms pro­gram fol­low­ing the slump in oil rev­enues.

The min­is­ter said the sharp drop in oil prices re­sulted in a mas­sive de­cline in the state rev­enues, prompt­ing the gov­ern­ment to carry out eco­nomic re­forms in­clud­ing di­ver­si­fy­ing sources of in­come. Ac­cord­ingly, the gov­ern­ment es­tab­lished the na­tional pro­gram for fi­nan­cial and eco­nomic sus­tain­abil­ity with the aim to re­duce the bud­get deficit.

The min­istry is cur­rently as­sess­ing the pos­si­ble im­pact of VAT be­fore im­ple­ment­ing it, the min­is­ter said, adding it is con­sid­er­ing ex­empt­ing cer­tain sec­tors and com­modi­ties from VAT to min­i­mize its im­pact. He said that the im­pact of VAT is lower on low and mid­dle class peo­ple be­cause they spend less, and VAT de­pends on spend­ing.

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