Kuwait residents have gone on a spending splurge, buying up new cars and mobile phones, fuelled by the government’s plan to write-off interest due on around $2.6bn worth of personal loans.
The debt waiver comes as consumer lending in Kuwait climbed to its highest level in more than four years, Bloomberg reported.
Around 47,000 Kuwaitis are eligible for the plan, known as the ‘family support fund’ and will cover loans amounting to around $2.6bn accrued since March 2008.
It is not the first time Kuwait government has agreed to write-off loans built up by citizens. The government previously wrote off almost all consumer debt after the 1991 Gulf War, it wrote off more to settle bad loans stemming from a 1982 stock market crash and lawmakers eager to win re-election made debt relief a priority in their campaigns to win votes. Kuwaitis vote for a new parliament on July 27.
"They are always looking for more forgiveness from politicians," Jassim Al Saadoun, head of Kuwait-based Al Shall Economic Consultants, was quoted as saying by Bloomberg.
Bader Nasser Al-Kharafi, a board member of Kuwait lender Gulf Bank, the country’s fourth largest lender by market share, said writing off citizens’ debt may cause problems down the line but hoped the majority of citizens would learn from the move.
“This is a concern, but at the point we have reached now, people are educated and they feel the tension and they have been through a tough time. I am sure some of them will have the habit of spending but let’s say the majority will try to improve their spending,” he told Arabian Business.