Kuwait backs end to diesel subsidies

Waiting on study to deal with possible negative effects on consumers
By Beatrice Thomas
Wed 11 Jun 2014 12:20 PM

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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