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Tue 13 Mar 2012 05:58 PM

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Kuwait backs big rises in public sector wages

Kuwaiti gov't also orders measures to head off inflation in the prices of basic goods

Kuwait backs big rises in public sector wages
A general view of Kuwait City, the capital of Kuwait.

Kuwait's government, under pressure from labour unions, has announced big rises in public sector wages while ordering measures to head off inflation in the prices of basic goods.

Authorities said late on Monday that government workers would get a 25 percent rise in their basic salaries, while pensioners would receive 12.5 percent more. Any increase in private sector wages will be announced at a later date, the government said.

The wage hike follows a series of strikes last year that put pressure on state companies to increase pay packets, as well a snap election last month that saw the Islamist-led opposition win control of parliament.

The cabinet is appointed by a prime minister hand-picked by the ruling family.

In the wake of this week's wage increases, the Ministry of Commerce has told economic officials to prevent any rises in the price of basic goods such as food, a top official said.

The ministry has "instructed trade controllers to handle decisively any attempt to raise the prices of basic commodities", commerce ministry undersecretary Abdelaziz Al-Khaldi told state news agency KUNA. He did not elaborate on how prices would be controlled.

The upward pressure on wages in Kuwait, partly due to increased union activity since last year's Arab Spring social unrest in the region, has become a major issue for economic policymakers.

The finance minister said last year that public sector wages had risen to about 85 percent of the country's oil revenues, which he called "a real danger".

Last month Kuwait's central bank governor Sheikh Salem Abdul-Aziz al-Sabah resigned after 25 years in the post, complaining about the rapid rise in government spending.

However, state finances appear able to cope with the latest public sector wage hike, at least for now; thanks to high global oil prices, the government posted a budget surplus of $47bn in the first nine months of 2011, nearly double the surplus in 2010.

Analysts expect economic growth to stay comfortable this year at around 3.5 percent.

And although the average inflation rate climbed to a three-year high of 4.8 percent in 2011, it remains far below levels hit in 2008, when it soared above 10 percent. Consumer prices rose 3.5 percent from a year earlier in January this year.

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Mumeen Chowdhury 8 years ago

Please let such salary increases be granted to expatriates as well.

james 8 years ago

what lunatic thinks increasing government spending on wages will not impact inflation further. The Kuwaiti only pay rises create a demand from other sectors added to which the fact that they have already had a pay rise last yr over half of the government income in now spent on wages for the Government.
expats currently are being granted 2-5% rises why cant we have the same benefits
Kuwait develop a proper monetary policy and not one that always capitulates to the citizens demands the central bank chairman was right and did not want to overseee the mess that is coming

John Mackay 8 years ago

All very sad really....Kuwait has so much potential but with the political infighting and spreading the wealth rather than investing it in the country to create a long term sustainable society is a long way of. Kuwait and other GCC countries are only able to function as countries due to the huge expatriate populations who have and always will be second class citizens as long as this system prevails....one day and its coming sooner than everyone will have you beleive, the oil wells will dry up and then reality may finally dawn.

jay 8 years ago

maybe a strike enmass by the expats for equal salary rights would be interesting however fear stops it but the resentment is growing and Qatar and other countries are offering bigger saleries so the drain of skills may come sooner than you think
i agree with John were second class and the government need to realise it would be nothing without us

American in Kuwait 8 years ago

The expats cannot keep up with inflation on food and rent. Tyhe day of reckoning is coming when the expats go home because they cannot afford to work in Kuwait.

Inflation is significant at the Supermarket; like 20% and it CANNOT BE CONTROLED ! Naive to think that it can be.

I accept being second class or even third class here.

John Mackay 8 years ago

Yes its Catch 22.....if all the expats left for a month all at once (which of course is not likely I know) then the country would cease to function. Expats will only ever feel like "visitors" despite the fact many have lived there their entire lives until the system changes..... nationals are to used to being handed things on a plate and until the culture of being given everything ends, the story will continue....25% pay rise ? In my entire working life I have never had a pay rise even approaching this level....reality and responsibility required

Thierry 8 years ago

With 90% of oil revenues going out to public sector salaries, increasing them any further would be political madness and full fledge communism! Beside, how do you want the private sector to compete and attract much needed and available local talents?

Steve 8 years ago

All the GCC spending as late is based on 100 dollar per barrel plus oil. Even if the wells don't run dry, a drop in price would cripple the region. I can remember oil at 20 - 30 dollars per barrel. It was not that long ago. You never know when the market will change and as I suggest, the region is at risk, not just Kuwait.
They can't give massive raises to non-government workers because its up to the company in the private sector to offer the raise. Its a nasty spot to be in. Usually in other world markets, people leave government work for better pay in the private sector............nothing lasts for ever.

Patrick 8 years ago

GCC OPEC country budgeting is a local decision and in Kuwaits case is based on $60-80 per barrel, which is far from the actual price - hence the huge trade surplus. Dont be fooled, there is plenty of cash to pay the increase. In respect of the private sector - kuwaiti national already receive a government incetive for working in the private sector, the value depends of their level of education and currently the maximum is around KD600 per month, around $2000. This will have to increase to maintain the interest of kuwaitis in the privite sector. In respect of inflation, i see no clear way how they can combat this - the short sighted method of raising wages to keep people happy is an unsustainable approach to a endemic problem in the GCC with the local labour market. I dont agree with comments about expats holding the entire GCC on their shoulders, although without subcontinent workers things would cease immediately