IMF urges Kuwait to impose taxes
Dubai, UAE - The International Monetary Fund (IMF) on Monday urged OPEC member Kuwait to introduce a package of reforms that includes imposing taxes and phasing out subsidies to plug a chronic budget deficit.
Kuwait has been hit hard since crude prices crashed in mid-2014 and earlier this month approved a budget with a huge shortfall for the sixth year in a row.
Nevertheless spending, mostly on hard-to-reverse categories such as salaries and social aid, expanded by 25 per cent only in the past two fiscal years while the public wage bill has grown by a bout 6 per cent annually, the IMF said.
Kuwait has huge fiscal reserves estimated at US$644bn by the IMF.
‘Delays in fiscal reforms would further amplify fiscal financing needs while slow progress on the structural front would dampen growth,’ the IMF said in a report.
Kuwait's economy grew by just 0.7 per cent last year and is forecast by the IMF to grow by 1.2 per cent this year.
The IMF said that without reforms, the government's financing needs are projected to grow rapidly, accounting for US$180bn over the next six years. The plan calls for gradually reducing public spending and curtailing the public wage bill.
The government should phase out fuel, electricity and water subsidies and social aid, which currently account for 7.5 per cent of GDP or US$10.3bn annually, IMF said.