No Cash For Salaries In December

The government failed to pass the Public Debt Law in Parliament yesterday, and the Council decided to return the law to the Parliamentary Finance Committee again, to submit a new report within two weeks, amid a storm in parliament's rejection of the government project.

Despite the revival of the General Reserve Fund by about 2.2 billion of the output of exchanging assets in the fund with the Reserve Fund for generations, Minister of Finance Barak Al-Sheitan warned during the session yesterday of a liquidity shortage crisis that may lead to the government’s failure to pay salaries in the future, pointing out that the ability to cover it will be possible until Next November.

During the session, the government confirmed what Al-Qabas revealed more than once of the depletion of the general reserve and its depletion of liquidity, and its reflection on the government's ability to meet its expenditures, and what might lead to the risk of liquidating assets.

The government's warnings of a budget deficit of 14 billion dinars and a lack of liquidity in paying the salaries of December did not persuade the MPs to pass the law, despite what the Investment Authority confirmed that the cash available in the reserve is running out in September, provided that the liquidity that will be pumped out of the future generations' reserves is extended.

The availability of "cash" for an additional two months. "In light of the lack of borrowing and the failure to implement economic reforms, the state’s general reserve will run out of liquidity, and it will not be able to cover its expenses due to the deficit," Al-Sheitan said. He referred to the justifications for borrowing financing the deficit in the general budget, which is represented in "salaries, subsidies, current expenditures and construction projects" and allows time to implement economic reforms.
He added that this comes to compensate for the lack of revenues in the face of expenditures in light of the sharp decline in oil prices, confronting the emerging "Corona" pandemic (Covid-19), reducing the impact of short-term reforms on citizens, and not compromising the investments of the Future Generations Fund and allowing the fund to grow.

He explained that one of the solutions proposed by the government in providing liquidity and clearly addressing the shortage is the exchange of assets between the State’s General Reserve Fund and the Future Generations Fund, which led to the provision of temporary liquidity. And this matter has become inevitable and is no longer appreciated or borrowed, decisions that would provide liquidity in the treasury cannot be postponed immediately. He referred to the available options, including issuing sovereign bonds in the current bond environment, which is attractive to issuers, in addition to borrowing from the Future Generations Fund, "but it must be the last step"
Turning to the option of withdrawing from the Future Generations Fund, he said that it is "an unwise step and not a part of financial and investment prudence, as the invested funds achieve returns that exceed the cost of borrowing." He added, "Like it or not, these are the options available in the short term, thank God, we have options in this ordeal, unlike many countries that do not have the financial solvency to borrow."

He said that the two aforementioned draft laws are considered one of the technical and professional alternatives that would work to strengthen the state budget and one of the ways to address the liquidity shortage. He mentioned that in the past, 10 percent of the estimated revenues were deducted, "but it is not the optimal measure, as happened in the years of deficit, as this procedure constituted an additional burden on the general budget, given that the deduction rate does not become apparent until after the results appear and the financial surpluses are available.

He added that the two submitted draft laws will allow the state to use the option of issuing sovereign bonds to provide liquidity immediately, coinciding with the activation of financial and economic reforms to achieve financial sustainability. He pointed to the possibility of achieving borrowing for the financial stability of the state and developing its economy as required, indicating that the issuance of sovereign bonds is a procedure in place by all Gulf states on an annual basis to cover their financial deficit. He suggested that the draft public debt bill set a maximum debt ceiling of 20 billion dinars (about 65 billion dollars), of which 12 billion dinars (about 39 billion dollars) would be allocated to finance construction projects and infrastructure.

He said that the advantages of borrowing are financing part of the annual state budget, investing in the infrastructure of the State of Kuwait, developing the local bond market and maintaining the state’s financial reserves. The Minister of Finance extended his thanks and appreciation to the Parliamentary Financial and Economic Affairs Committee for its efforts in preparing the report, expressing his hope for cooperation by members of Parliament in approving the two draft laws.

Refusal of representation

Sheitan’s request to pass the “public debt” was met with clear parliamentary rejection, criticism for the lack of a government reform plan that exempted borrowing, along with calls to stop the 10 percent deduction that goes to the Generations Fund as a solution that stops the default. Representative Adnan Abdul Samad said: "Public debt" cannot be approved unless a reform plan is drawn up and an end to the deduction of the 10 percent going to "generations." Abdel Samad recalled what he called "a negative experience with the public debt" that the government took after the liberation, as the general reserve became depleted at the time, as even spending on armaments was carried out from the reserve, and that is why the problems continued to be exacerbated due to the absence of real control, which, when available, will not need to borrow.

In turn, Representative Ahmed Al-Fadl said that what was presented is not related to any economic reform as it is temporary solutions, as oil prices may not rise, so he considered the matter “buying time”, and God willing, we will not reach the stage of inability to pay salaries, as there are laws still Locked in drawers and is bound to provide solutions to the government. MP Saleh Ashour said that the government’s failure to take real measures to stop waste is a direct cause of the budget deficit crisis, indicating that the matter was repeated even when oil prices were high, and sometimes amounted to $ 120. He stressed that we suffer from mismanagement, the absence of an economic plan, and delay in taking the decision, stressing that borrowing will increase the burden on the state and will not ease its impact.

Legitimate Contraindications

For his part, Representative Usama Al-Shaheen stressed that his rejection of "public debt" stems from legal, constitutional, economic and political reasons, indicating that there are other paths enacted before us, calling for the approval of "bankruptcy" because of its utmost importance. As for MP Riad Al-Adasani, he believed that the solution lies in “leaving the Ministry of Finance for Sheitan,” which he described as threatening the citizens ’livelihoods through the economic document, indicating the validity of everything contained in his interrogation of him.

He added that the minister’s solutions do not seem realistic, in light of the accumulation of debts and the delay in handling the "covenant calculation", stressing the need to withdraw the public debt law and not allow any prejudice to the salaries of citizens.

Deputy Abdullah Al-Kandari called on the government to exploit many doors that spare the "public debt" and to work seriously to recover $ 25 billion of the money stolen over the years. While Representative Yusef Al-Fadala saw the necessity of withdrawing the public debt bill, "because on the day of prosperity we did not act properly, so how in a time of distress?" Addressing the government, Al-Tabtabai said: When you thought about a solution to the financial crisis, you went to the document, and "public debt" may be the best solution, but it is only on paper. Otherwise, how can it be a vital and convincing project without specifying the aspects of spending? Demanding to support the owners of small projects. He addressed to His Highness the Prime Minister, saying: "We know, Your Highness, that your hands are clean, but your steps are slow. The world is moving, and when we come to the solution we have a cowardly and bad document.
In turn, MP Khaled Al-Shatti called on Minister Al-Shaitan to refute people's doubts about the "public debt" and the "document", indicating that history proves that all governments that borrowed entered a dark tunnel, as every religion will be born from the womb of another religion, and we do not want to We reach such a stage and things must be clear to the people. As for MP Khalil Abel, he declared his rejection of the bill and swore to vote not in approval, questioning the government's measures to solve the crisis, while MP Hamdan Al-Azmi saw that thinking about borrowing is evidence of the government's failure.
Al-Shaitan: It saved 3.7 billion from passing the No Transfer Act to the Fund.
There is no deduction for "generations" except in the time of surpluses.

Yesterday, the National Assembly approved the first and second deliberations of a bill to amend the decree of the law on reserves for future generations, with the approval of 47 members, the disapproval of 6 members, and two abstentions. Finance Minister Barak Al-Shitan said that not deducting from the general reserve for the benefit of the Future Generations Fund, except in the event of a budget surplus, is one of the ways to address the liquidity shortage that the state suffers from as a result of low oil prices and increased public budget expenditures.

He added, "The government is considering many alternatives to support the general budget, including the amendment of the Future Generations Fund Law, which is one of the ways to address the lack of liquidity." He explained that in the past 10% of the estimated revenues were deducted annually, and this procedure is not considered optimal and inflates the budget deficit, and it is now suggested that the deduction rate will not take place except when budget surpluses are achieved. For their part, MPs stressed that stopping the deduction of 10% of revenues for the generational reserve is a step in the right direction, surprised at the depletion of the general reserve in an oil-producing country, noting that the provision of 8.8 billion dinars to support the general reserve in addition to oil revenues, and there will be no need to borrow at present.

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