Kuwait backs end to diesel subsidies

Waiting on study to deal with possible negative effects on consumers

The Kuwaiti government has decided in principle to end subsidies on diesel fuel but will wait on a study to deal with “possible negative effects on consumers” before implementing the change, it has been reported.

Last month, the Kuwaiti government warned that spending outpaced revenues and this could lead to a budget deficit in 2017-2018 for the Gulf state.

“The Council of Ministers has decided in principle to stop subsidies on diesel,” a statement released late Monday said.

“But the Cabinet is waiting for a study by the higher planning council on ways to deal with possible negative effects on consumers.”

Oil Minister Ali al Omair told parliament three weeks ago that ending subsidies on diesel would save around $1bn a year.

The oil-rich state currently spends about $18bn annually on subsidies, with the cost of subsidies between 2005 and 2013 increasing more than fourfold, or about 23 percent a year, the Finance Ministry said.

Conversely, oil income rose from $45.9bn in 2005 to $106bn last year, while Finance Minister Anas Al Saleh said that if oil prices remained at around $100 a barrel, Kuwait would post an estimated budget deficit of $2.3bn in the 2017-2018 fiscal year.

Last month, the International Monetary Fund warned Kuwait to contain a rapid rise in public wages and subsidies to safeguard the economy against oil price shocks.

Kuwait is also revising subsidies on electricity, water and petrol, currently sold at well below cost.

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