Finance Minister urges parliament to endorse bond issuance bill
Government spending to stimulate real estate
KUWAIT: The parliament’s failure to approve the bond issuance bill means that the state’s general reserve would be consumed to address budget deficits, Kuwait’s Finance Minister Dr Nayef Al-Hajraf said . The state’s general reserve is exposed to risk because it is constantly used to address financial deficits, Hajraf said in an interview with Al-Rai TV channel. He underlined the importance of safeguarding Kuwait’s financial system, which was based on the general reserve.
“Approving the bonds’ bill does not mean the government will issue bonds tomorrow,” said Hajraf who noted that “entering international stock markets is studied carefully.” Hajraf said there should be a good governance and a wise administration to manage the bond issuance.
The government tabled a draft law to finance committee at parliament to seek funding from local and international markets, he said, as well as increasing debt ceiling to KD 25 billion ($83 billion) with 30 years lending period. The draft law was approved by the finance committee and is now awaiting the house vote.
“The objective behind the bond issuance bill is to maintain the state financial condition and economic sustainability,” said Hajraf, who warned that Kuwait suffered from “real challenges and structural problems which should be addressed rapidly before they worsen.” Hajraf, meanwhile, said the government would soon launch the national program for economic and financial sustainability, in parallel with financial reforms which aimed at directing the subsidies to the people who deserve them. This program, he added, aimed at further activating private sector’s role and the development of non-oil sectors.
Real estate
Following recent recession in domestic development, government spending on housing and construction is forecast to trigger hike in the realty demand in the first quarter of 2018. It is also predicted that hotels and furnished apartments will flourish, in tandem with execution of government mega projects, namely development of Kuwait International Airport, expanding the Amiri Hospital, constructing Jaber Causeway, AlJahra and Jamal Abdulnasser roads, in addition to a number of private projects. The local property market has been affected with unfavorable domestic and external factors, namely imbalance in supply and demand and maintaining a strict credit policy by the banks. Other factors have also left marks on the market; such as decline of proceeds from realty enterprise, capitals’ shifting to stock markets, unsteady oil prices, geopolitical events and increase of construction materials’ prices.
Moreover, the sector’s recent recession was attributed to increase of power, water and fuel rates. Nevertheless, experts believe that investment in the sector remains safe due to high proceeds, reaching in general eight percent. Last year, there were bids to stimulate the market; with auctions confined to selling land plots, however up to 20 auctions had to be delayed due to investors and auctioneers’ absence.
Realty experts interviewed by Kuwait News Agency (KUNA) believe that some of the main factors affecting the market are shortage of promoted plots against high demand and rare investment alternatives. Rents in the investment and commercial sectors have recently dropped by 10-15 percent, they say.
Qais AlGhanim, Secretary of the Kuwaiti Real Estate Association, affirms that the market has remained largely in a lackluster status, with trades not exceeding seven percent of the displayed properties. Some entrepreneurs have been shifting to the stock market, lured by instant profits.
Suleiman Al-Dlaijan, manager of a property agency, says young citizens, who make up 60 percent of the 1.4 million Kuwaiti population, are number one trades’ seekers. Up to 700,000 young Kuwaitis aspire to own a private house, but most of them cannot afford it.
Figures by the Public Authority for Housing Welfare (PAHW) show that there are 100,000 residence applications per year. Twelve thousand residential units were distributed last year. Dlaijan believes that hike of power, water bills; restrictions imposed by the Central Bank of Kuwait (CBK) on credits for private housing stemmed the high property prices.
As to trades’ value over the past three years, he said it amounted to KD 4.4 billion ($14.5 billion in 2014), KD 3.2 billion ($10.5 billion) in 2015 but dropped in 2016 to KD 2.4 billion ($7.9 billion). Abulaziz Al-Dghaisheem, chairman of a realty group, believes that auctions have stimulated the market, however geopolitical factors’ negative impact are still noticeable. Director General of Athra Real Estate Company Maitham Al-Shakhs forecasts revival of the property market this year, amid predicted economic growth.
Subsidies and expenses
In other news, the Cabinet has sent to the National Assembly a detailed list showing the amount of subsidies and salaries in the state’s budget for the fiscal year 2018/2019, which needs to be voted on by March 31, 2018, AlAnbaa reported yesterday.
Total subsidies in the new budged reached KD 3.44 billion, distributed in six main sectors: Energy and fuel with KD 623.446 million, Education (students aid and rewards) with KD 633.39 million, social support allowance with KD 398.230 million, residential support (rent allowance, etc.) with KD 371.455 million, treatment abroad with KD 305.510 million, and sports with KD 45.880 million. As for economic subsidies, it reached KD 30 million, while agricultural subsidies reached KD 25.190 million, and information subsidies KD 110,000 paid.
Meanwhile, salaries and expenses totaled nearly KD 11 billion, distributed as follows: KD 2.213 billion for the general budget’s contribution in social securities, KD 510.4 million for national labor support allowances in the private sector, KD 293.9 million for social care, KD 6.9 billion as salaries of ministries and state departments’ employees, KD 211.8 million for employees in the judicial sector, KD 909.8 million for affiliates and KD 129.9 million for independent bodies.
The general reserve is exposed to risk