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Mon 30 Jun 2008 08:05 PM

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Finance minister warns over excessive spending

Kuwaiti minister says pumping more money into economy will stoke inflation.

Kuwait's finance minister warned on Monday that pumping more money into the economy of the Gulf state, which agreed last week to raise citizens' benefits, could further exasperate record inflation.

"We are talking about a [inflation] rate of 10 percent. Any increases or fresh capital injections into the country will have an impact on inflation," the official KUNA news agency quoted Mustapha Al-Shamali as saying.

Last week, parliament passed a bill to increase salaries for Kuwaiti public sector employees by 50 dinars ($188.8) to soften the impact of inflation, which hit a record of 10.14 percent in February.

The government has also approved a plan proposed by MPs to boost a fund meant to help Kuwaitis repay personal debts to 500 million dinars from a previously planned 300 million dinars.

Al-Shamali said the wages increase could take effect in August.

Expenditure in the 2008/09 budget more than doubled to a record of around 19 billion dinars. The bill did not reflect the wages hike or the boost to the debt relief fund.

Central Bank Governor Sheikh Salem Abdul-Aziz Al-Sabah told newswire Reuters earlier this month the government should contain spending to help tackle inflation in the world's seventh-largest oil exporter.