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Sat 23 Feb 2008 02:43 PM

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Kuwait doles out allowances, risks stoking inflation

Nationals in public and private sector to get extra $439 per month to ease costs burden.

Kuwait doles out allowances, risks stoking inflation
LIVING COSTS: Kuwaits move to give allowances could stoke inflation, analysts said. (Getty Images)

Kuwait, facing spiralling inflation, said on Thursday it would give nationals working in the public and private sector and pensioners an allowance worth 120 dinars ($438.9) per month.

The government allowance, which also covers people receiving social assistance, will take effect in March, Finance Minister Mustapha Al-Shamali told state agency Kuna.

Foreigners working in the public sector will receive 50 dinars per month, he added, leaving only foreigners working for private sector firms excluded.

"This [payment] might result in higher inflation as people will have [more] money in their hands and spend more. The effect will take time to come," said Faisal Hasan, head of research at Global Investment House.

Kuwait, the world's seventh-largest oil exporter, is struggling to curb annual inflation that soared to a record high of 7.3% in October, driven by a jump in housing prices and food costs.

The government has been under pressure from parliament to curb inflation. The cabinet approved measures this week to raise subsidies on basic food stuffs and building material.

The allowance, drawn up in coordination with the World Bank, is aimed at helping ease the effects of rising prices, Kuna quoted State Minister for Cabinet Affairs Faisal Al-Hajji as saying.

In neighbouring Saudi Arabia, the government last month approved plans to pay a cost of living allowance over three years.

In December, Kuwait's parliament approved a draft law calling for an increase of 50 dinars in wages of public and private sector employees earning less than 1,750 dinars.

Kuwait broke ranks with its Gulf Arab partners in May, dropping its currency's peg to the declining dollar to control inflation that it partly blamed on more expensive imports. The currency has gained almost 6% since then. (Reuters)

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Yuri 12 years ago

Typical Kuwaiti move! Pay those who already have more than they need and completely ignore the thousands of expat workers who can barely survive on starvation wages.