Kuwait urged to reduce subsidies

Reports say finance ministry wants a 15% drop in subsidies within two years
Kuwait urged to reduce subsidies
By Neil King
Thu 08 May 2014 01:23 PM

Kuwait needs to reduce subsidies by at least 15 percent in two years, according to the emirate’s finance ministry.

Sources in the ministry told local press there was a ‘general agreement’ among a specialised committee that the country needs to make the cut while maintaining subsidisation rates for basic services.

The committee, formed to study ways the government can cut its subsidies with limited social impact, is also said to have agreed that energy is likely to be one area where rations are expected to be enforced.

Energy subsidisation currently costs $8.9bn (KD2.5bn) annually, with Kuwait paying about $19.3bn (KD5.4bn) each year for subsidies on fuel, energy, construction material, and food.

Earlier this week, the International Monetary Fund (IMF) called on Kuwait to contain a rapid rise in subsidies, as well as public wages, to safeguard the economy against any oil price shocks.

The IMF said general subsidies, particularly on electricity and fuel, constitute seven percent of gross domestic product, and as high as a quarter of spending, which was about $70bn last fiscal year (KD19.5bn).

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