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Sun 10 Nov 2013 05:14 PM

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Kuwait said to review $16bn annual subsidies

Government reportedly plans to form special committee to look at subsidies on goods, services

Kuwait said to review $16bn annual subsidies
Kuwaiti Prime Minister Sheikh Jaber Mubarak al-Sabah.

Kuwait's government plans to form a special committee to review subsidies on goods and services which are costing the Gulf Arab state more than KD4.5bn ($15.9 billion) a year, daily al-Qabas reported on Sunday, citing government sources.

Like other wealthy countries in the region, Kuwait does not tax earnings and provides a generous welfare system for its citizens. All residents, including foreigners, benefit from subsidised petrol, cheap electricity and water, while Kuwaiti nationals get extra support for housing and food.

These generous spending programmes, which al-Qabas said account for 22 percent of the annual budget, are often cited by analysts as one of the reasons why the region largely escaped Arab Spring-style unrest.

However, Kuwaiti ministers have warned that state expenditures will exceed oil revenues within a few years if spending keeps rising at the current rate. The International Monetary Fund (IMF) says this could happen as early as 2017 while the government believes there could be a budget deficit in 2021.

Finance Minister Sheikh Salem Abdulaziz al-Sabah first suggested last month that Kuwait might review its subsidies system, as encouraged by the IMF. Sheikh Salem is an advocate of cutting spending and is believed to be behind the push to change the subsidies system.

IMF chief Christine Lagarde is due to speak at a central bank event in Kuwait later on Sunday.

Al-Qabas newspaper said the committee, made up of representatives from government ministries, would look at all goods and services, including subsidies for tuition fees, sports clubs, marriage grants, benefits for the disabled and the additional support given to farmers and fishermen.

The plan is to make sure that subsidised services reach only the people who need them, the paper said.

Kuwait's Prime Minister also joined in the debate about spending last month, saying that the welfare state was unsustainable and that the major OPEC oil producer needed to cut spending and consumption of its natural resources.

Any such plans may run into problems in parliament, where many lawmakers campaign to raise benefits and say the state can save money by eliminating wasteful spending and bureaucracy instead.

Arabian Business digital magazine: read the latest edition online

jay 6 years ago

start with petrol this will reduce the traffic on the roads not effect the low paid and is simple to implement also the more you use the more you pay as one of the lowest cost petrol in the world this would raise significant income for the government as its one of the biggest subsidies

Mumeen 6 years ago

Without the subsidies for petrol, electricity and water, which only the expats benefit from, it would not attract expats to work here to develop this country. However, these subsidies are taken away by citizens through rents, etc. A KD300 monthly rent apartment can easily be obtained with KD100 in India/Pak/BD with much better environment. If subsidies go, taxes are imposed, then salaries must rise on the other hand as otherwise things will not be the same.

Abdullah 6 years ago

All GCC governments should be evaluating their government sponsored subsidy levels, expecially this country, who has failed to implement a development plan. At subsidy levels designated in the 1970's is ridiculous, however, to raise them dramatically could cause anarchy within the nation, so to increase them at minimal levels on a periodic basis is imperative. This country also needs to understand that without the implementation of key development projects will be catastrophic to them economically, so they need to start spending money in the country on key government projects, such as a new airport, metro and overhaul of the national carrier for future growth and stability. They could use formative foreign expertise, because their problems seem to stem from their inability to implement constructive improvements in their nation. It's apparent that Parlimentary 'grillings' have been used to stall the development of this nation which necessitate them to move 'grillings' to the courts.