Two Banks Plan To Grant Government Loans Exceeding 100 Million Dinars

The wheel of government finances appears to be turning again, like two banks, one operating under Islamic law and the other under regular law is poised to offer a government agency a loan worth more than 100 million dinars.

According to local Arabic daily citing related sources, the exact date for the completion of the deal is unknown, but it is expected to happen soon, with the agreement being reached on some procedural details. It was also explained that preparations for approving this financing had been ongoing for some time and that completing it took a long time and had been postponed several times due to considerations related to the implementation schedule of government projects.

According to the sources, the loan supplied to the government would be used to meet the government's target credit needs for the development of a commercial housing project in northern Kuwait, emphasizing that the target project's importance doubles with the long-term targeted plan.

The sources did not reveal each bank's credit ratios or if they were 60 percent conventional and 40 percent Islamic, as is customary. They noted that the mechanism for determining the financing is different this time because it does not reflect the two sectors as it does previously.

A banker expects the expected government loan to be a heavy stone in moving the waters of investment spending, which has taken a narrow path from the government since the start of the Corona virus's repercussions, and before that, the growing deficit rates recorded in the general budget, which reached 952.29 million dinars in the first 11 months of the fiscal year ending in March, accounting for 36.3 percent of the total approved in the budget, which amounted to 2.621 billion.

In general, projected financing takes priority. On the one hand, it is categorized as a new loan because it has not been rescheduled with a defaulting creditor or is not experiencing repayment issues. It also signifies a challenging credit number that isn't used very often in the next two years. Furthermore, this funding is dedicated to areas outside of the oil sector, which is typically a focal point for substantial government funds. Finally, this agreement raises hopes for an increase in the pace of substantial finance in the local market in the near future.

It's worth noting that KPC negotiated a one-billion-dinar syndicated loan with local banks in October 2020, which was the largest of its sort in Kuwait since the breakout of the Coronavirus pandemic.

Banking officials expect large money to return to the private sector and government agencies this year, and that growth will be qualitative, albeit at a slower pace than before "Corona," especially with optimistic projections of economic activity, the most recent of which comes from the IMF.

The bankers went on to say that the decrease in public spending announced in August 2021, as well as the significant gain in the nominal gross domestic product following the rise in oil prices in global markets and the resumption of many activities, will drive Kuwait's economic recovery in the near future.

The bankers stated that through the end of the year, banks will continue to use selective financing to fund big new projects, noting that this will assist to recover the planned credit growth rate and bring it to a healthy level.

Kuwait's current account surplus is expected to climb to roughly 16.1 percent of GDP, according to the IMF, due to an increase in oil exports.

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