Kuwait City: The National Assembly’s finance and economic committee has rejected a public draft bill that would allow the government to borrow 20 billion Kuwaiti dinars, locally and internationally, across 30 years, reported
MP Safaa Al Hashem, head of the finance and economic committee, said “the public debt project has a lot of problems,” and that borrowing money will not solve the problem, especially if there is no reform plan set by the government to tackle the economic challenges.
The government submitted the draft bill in July to the finance and economic committee, as the committee has to first approve the proposal before presenting it to the floor of the National Assembly for voting.
The government and the National Assembly have been at a deadlock for the past couple of years in regards to borrowing money from abroad. This is not the first time the National Assembly turns down a public debt bill, as there has been a couple of attempts in the past.
Depleting liquid cash
Drop in oil prices and the COVID-19 pandemic have both had a negative effect on the Kuwaiti economy, as governmental spending has increased and the state’s revenue has decreased.
Last month, the General Reserve Fund, the government’s main source of budget financing, lost 1.5 billion Kuwaiti dinars within 38 days. The government has been tapping into the General Reserve Fund to obtain liquid cash amidst the economic burden. S&P Global Ratings predicts that the General Reserve Fund will be unable to handle the economic downfall alone.
In June, the government discussed tapping into the Future Generation Fund, in order to deal with the economic impact of COVID-19. The Future Generation Fund, the oldest sovereign wealth fund in the world, is set up as a security option for the future generation Kuwaitis.
The International Monetary Fund estimates that Kuwait could end up with a 11 per cent deficit, compared to the 4.8 per cent surplus last year.
