Gulf state said it will more than double portion revenues it puts in Future Generations Fund
Kuwait's finance minister said on Tuesday that the Gulf state would not cut down on spending as a result of a plan to invest a greater percentage of its revenues in a rainy day fund, state news agency KUNA reported.
OPEC producer Kuwait announced plans on Monday to more than double the portion of state revenues it puts into its Future Generations Fund this fiscal year.
It had previously invested 10 percent of revenues in the fund, managed by the Kuwait Investment Authority, but now wants to raise that to 25 percent.
The move is thought to be aimed at investing state money more efficiently although the government has not disclosed a specific reason for the increase.
The decision "will not be at the expense of investment spending," Finance Minister Nayef al-Hajraf said, according to KUNA. He said he hoped the increased contribution would continue the following fiscal year.
He said the move was aimed at encouraging savings and that the plan would not distract the government from dealing with problems in the economy.
Kuwait booked a record budget surplus of KD13.2bn (US$47bn) in the fiscal year that ended in March thanks to high oil income and lower spending than planned.
A long-running political crisis has held up investment, especially in large infrastructure projects, allowing the budget surplus to grow. A KD30bn (US$107bn) development plan aimed at boosting and diversifying the economy has stalled.
With more than half of Kuwaiti nationals under 25, the government wants to store up money in the Future Generations Fund as a nest egg for when oil supplies diminish or for when the economy suffers other shocks.
But analysts say Kuwait also needs to diversify its economy away from oil and increase private sector employment of its nationals in order to resolve fundamental economic problems.
There are huge problems that need to be addressed in the Kuwait economy. Diversification away from oil, refinement of the foreign business laws to attract foreign business and implementaton of key development projects. What this country needs immediately is the correct foreign expertise to assist the Kuwaitis with jumpstarting key projects. To be complacent behind a nest egg for future generations, whilst ignoring the key issues is the core of Kuwait's problems. To resove fundamental economic problems will not only springboard Kuwait's stagnate economy, but solidify the country's economy for future generations.