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Wed 3 Apr 2013 02:20 PM

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Kuwait approves personal debt relief plan

Finance Minister said gov't was expecting to pay US$2.6bn for the plan

Kuwait approves personal debt relief plan
Kuwait City, Kuwait skyline

Kuwait's parliament approved a plan on Wednesday to buy some citizens' personal loans, write off the interest and reschedule repayments.

Finance Minister Mustapha al-Shamali said on Tuesday the government was expecting to pay KWD744m (US$2.6bn) for the plan, which covers personal loans taken out before the end of March 2008 from commercial banks.

The bill passed with 50 votes for, four against and three abstentions.

It also said banks would have to pay back any overcharged interest to citizens. This would apply to interest charged at more than 4 percent over the discount rate.

Many lawmakers elected in December made debt relief in the oil-rich state a priority of their campaigns. Economists and government officials have voiced concerns about the long-term sustainability of such measures.

Lawmakers had originally sought a complete bailout of billions of dollars of household debt but were met with strong resistance from policymakers who said the plans were not feasible.

The International Monetary Fund said last year Kuwait will have exhausted all of its oil savings by 2017 if it kept spending money at the current rate.

It is not the first time that Kuwait, one of the world's richest countries per capita, gives out financial aid to its citizens.

In 2011, to mark three major anniversaries, ruler Sheikh Sabah al-Ahmad al-Sabah granted KWD1,000 to each of the country's 1.2m citizens and free food rations for 13 months.

Kuwait's oil wealth and generous welfare state have helped to shield the Gulf country from severe Arab Spring-style unrest, although there have been demonstrations over political participation and other local issues.

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