Subsidy proposal could deliver $3.5bn Kuwaiti budget savings

Finance Ministry proposal for tiered subsidisation for electricity and water could bring 20% savings annually: report

Kuwait’s Finance Ministry has recommended a tiered subsidisation program for electricity and water, according to users’ consumption, in what could save the budget 20 percent, it has been reported.

The Gulf state is attempting to reign in its enormous subsidisation program – which accounted for about KD5bn ($17.75bn) last year – but it is a highly sensitive political issue.

A Finance Ministry group formed to assess potential changes has recommended reducing subsidies for high users, according to sources quoted by local Arabic newspaper Al Qabas.

Under the proposal, electricity consumed in a month would be charged at intervals between 2-12 fils, with the higher price applying to consumption over 12,000 kilowatts.

Water consumed in private residences would be charged at 800 fils per 1000 gallons for up to 10,000 gallons. Anything over 30,000 gallons would be KD2.5 per 1000 gallons.

Subsidisation means Kuwait has among the lowest electricity and water charges in the world.

A kilowatt of electricity that costs the state 30-40 fils to generate is sold to consumers for 2 fils, while water is sold at 800 fils per 1,000 imperil gallons.

The cheap fees also mean Kuwait has among the highest usage in the world. Average electricity consumption per capita is 16,122 kilowatts per hour, which is almost double of Saudi Arabia’s rate of 8,161 kilowatts per hour, according to the World Bank.

The International Monetary Fund and the Kuwaiti Finance Minister have warned the oil-rich country will record a deficit before the end of the decade unless it reigns in reoccurring spending.

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