Concerns Arise Over Kuwait's Inability To Implement Economic Reforms

It has been warned that giving in to economically irrational populist demands and random parliamentary bidding could result in catastrophic financial consequences that Kuwait may not be able to bear and push it towards a serious financial impasse that may threaten its sovereign credit rating and economic standing, reports Al-Qabas daily. Between a frustrating government’s inability to approve financial sustainability laws and a miserable failure to achieve tangible progress in the file of financial and economic reforms, the chaos of random parliamentary demands continues in light of the absence of economic logic in them and the lack of study of their financial cost, as if they suggest a destructive plan to drain the “generations” reserve, as the bill to cover Increases and financial claims will not be able to be covered by a budget at $200 per barrel of oil.

While experts pointed out that the state is limited in its ability to respond to ill-considered parliamentary demands at high cost, they also noted that all financial and economic data indicates Kuwait's finances are on the verge of explosion, and if there are no real, implementable reform programs accompanied by strong will, it won't be long before they explode. Putting it into practice, salaries and subsidies consume about 80% of the country's budget, whereas modest spending on capital projects often encounters a variety of obstacles.

A conservative estimate of $80 per barrel for oil prices in the next fiscal year 2024-2025 could result in 6.1 billion dinars in deficits, and 9 billion dinars at a rate of $70 per barrel, at which point salaries, wages, and subsidies would represent 113% of the general budget revenue, and even higher. Without taking into account the cost of absorbing between 20,000 and 25,000 new workers.

According to them, any increase or allocation that appears on the surface to be a grant will not add any value to the economy, but will evaporate in the market, which reacts directly to every increase. An example of this is the increase in the housing loan, which was reflected in land prices in Kuwait. Chairman of the Board of Directors of Al-Shall Economic Consulting Company, Jassim Al-Saadoun, said in a statement to Al-Qabas that in Kuwait, the government is leading the competition in adopting populist policies that completely accelerate the country’s entry into a more severe contraction phase, coinciding with the deepening of the public finance crisis, and with an increase in the imbalance in pension funds.

He added, that public administrations in other countries worry and perhaps panic when they issue indicators that confirm that their performance is the worst within their region, with all the risks it entails for the near future, and they begin to formulate scenarios that determine the size of the cost if their policies continue as they are, and then they begin to chart a way out of it, which is except for Kuwait, which we have not heard from its officials of jealousy or concern for it, which would lead to a move or even a statement suggesting it is moving in that direction. Al-Saadoun pointed out that what the public administration is supposed to know if it cares about the future of its country is that the deficit for the next fiscal year 2024-2025, at the same current level of public expenditures, will reach 6.1 billion dinars at an optimistic rate of oil prices of around $80 per barrel, and will rise to 9 billion dinars when Average oil prices are around $70. At that level of oil prices, salaries, wages, and subsidies will become about 113 percent of the general budget revenues, and higher than that for current expenditures, and without taking into account the cost of absorbing between 20,000 and 25,000 citizens coming to the labor market, he said.

For his part, economic expert Muhammad Al-Qadi told Al-Qabas that about the issue of prices and high prices and the demands made by several representatives to improve the standard of living and combat high prices, we must consider the issue calmly and fairly for the citizens, the consumer, and the state’s budget and the extent of its ability to bear such demands with a careful and distant eye. Chairman of the Board of Directors of Hayat Investment Company, Dr. Nabil Al-Mannai, said: Anyone who monitors the rates of growth and increase in government spending during the last 10 years, in addition to the policies of subsidies, employment, and wealth distribution, including social safety nets and how to penetrate them, will find that the state’s finances are unsustainable. According to Faisal Al-Zamil, an economist who specializes in Islamic economics, sustainable development is characterized by continuity, like a highway without signals or intersections. There is great potential for the state to diversify its sources of income because of the smooth flow of traffic there.

Economy Diversification

Then he said, "I will take a look at one axis of this continuity, which is trade exchange, which was Kuwait's primary source of income before the oil era began, and it is wise for it to develop during this era so that it can diversify its sources of income, and this requires an infrastructure that is commensurate with developments as well. Large in the world of communications, financing systems, storage complexes and effective presence in supply chains.”

Former member of the Supreme Council for Planning and Development, Ali Rashid Al-Badr, stressed that economic sustainability does not require issuing new laws that obstruct development and expansion, but rather an effective and logical government economic development policy that enables the economy to diversify its sources and prevent it from becoming dependent on one depleted resource. In the medium and long term, it is subject to severe fluctuations. Furthermore, he said Kuwait needs to develop additional strong sources of income in addition to oil by creating and encouraging the establishment of national companies in a variety of service fields that can grow and expand internationally, as well as exploit our human resource potential, which is now being wasted in administrative jobs, piling up in the towers of government institutions with little or even no productivity.

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