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Wed 18 Jun 2008 03:22 PM

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Subsidies cost Kuwait $32.7mn in May

UPDATE 1: Official says gov't 'exerting great effort to sustain affordability of goods' as concern mounts.

Kuwait spent 8.7 million dinars ($32.7 million) on subsidies last month as the government tries to reduce the burden of record inflation on its citizens.

An official at the Ministry of Commerce and Industry said on Wednesday that the ministry spent 5.9 million dinars on food subsidies and a further 2.8 million dinars on subsidising construction materials, state news agency KUNA reported.

Mohammad Al-Enizi, responsible for subsidised goods' provisions at the ministry, said the ministry was "exerting great effort to sustain affordability of goods", according to KUNA.

Al-Enizi also said the ministry planned to open up a centre for the sale of subsidised goods in each cooperative society in the Gulf state, adding that three or four new centres were expected to open this year.

Al-Enizi's comments come amid growing discontent in the Gulf state over soaring prices, which pushed inflation above 10 percent in February.

Kuwait's government last week unveiled a proposal to combat inflation, including cutting import duties on food and increasing the value and number of subsidised products.

However, the government is under increasing pressure from the newly-elected parliament to hike salaries for those working in the government sector, which employs the majority of Kuwaiti nationals.

According to the Al-Watan daily, Kuwait is considering subsidises on 100 products including Rice, milk, cheese, juices, fish and baby food, which would bring the total number of subsidised goods to 123.

Kuwait is the only Gulf state not to peg its currency to the US dollar, which has been blamed for driving up inflation by increasing the cost of imports and restricting monetary policy.

Kuwait has since allowed its dinar to rise more than 9 percent since it depegged in May last year.

However, inflation in Kuwait has continued to climb anyway, hitting a record 10.14 percent in February.