Depleting liquidity risks Kuwait credit rating
KUWAIT CITY, Sept 4: The government has raised the level of warning about the danger of depleting liquidity in the general reserve which threatens the government ability to pay salaries, while the Minister of Finance and Minister of State for Economic Affairs and Investment Khalifa Hamada has warned saying “the state is on the verge of a difficult time during which it may not be able to meet the needs of its citizens and fulfill its obligations, which will inevitably affect Kuwait’s reputation and credit rating,” reports Al-Rai daily.
The public treasury, the sources say, faced a deficit during July that exceeded all available possibilities and means to help the state fulfill its obligations which disrupted the government institutions in the country for a week which prompted the Kuwait Investment Authority (KIA) to use exceptional alternatives to save about 300 million dinars.
The KIA warned that “what it did was just immediate solutions to avoid any negative consequences that may result from the non-payment of citizens’ salaries, as well as the popular and global reactions in the event that citizens’ pensions were not paid, and this has a severe negative impact on Kuwait’s reputation locally and globally without the certainty that this deficit will not be repeated in the coming months.”
The Council of Ministers studied in detail, during its meeting on Aug 16, the recommendations of the Economic Committee regarding the lack of liquidity in the general reserve and the need to find radical solutions to confront the deficit in the state’s general budget, which needs to be done by approving the law of limited withdrawal from the Future Generations Reserve Fund and the Public Debt Law, while implementing financial reforms without any delay to avoid negative effects in the future.
At the meeting the Council of Ministers had taken a number of decisions and recommendations aimed at limiting spending and enhancing revenues, the most important of which was reducing spending from the budget and raising the efficiency of collecting due government debts, reconsidering the value of rents, lands and state property buildings, prices of commercial and industrial plots, treatment abroad and other measures to rationalize expenses.
The government’s vision identified radical solutions to confront the liquidity scarcity and deficit such as adoption of a law to put limit on withdrawals from the Future Generations Reserve Fund; adoption of the Public Debt Law; review of participation in all local and foreign exhibitions and conferences, reducing official missions, research, studies and consultations and non-essential service contracts (cleaning, security, printing, hospitality, parties and gifts).
This is in addition to reducing budget spending by no less than 10 percent; reconsidering the cost of government services, collecting outstanding debts owed to government, reducing by 30 percent the cost of treatment abroad and limiting the facility to critical cases only, reviewing rewards granted to senior government officials, reviewing the ‘rewards’ clause, possibility of employing more Kuwaitis in government institutions and disbursement of food supplies to each Kuwaiti family.