IMF urges Kuwait to im­pose taxes

Muscat Daily - - BUSINESS -

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.

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