Kuwait attempts major economic overhaul

Kuwait’s Finance Minister faces backlash from parliament with proposed economic reforms

 
Kuwaiti Finance Minister Anas al-Saleh. Al-Saleh has proposed a drastic economic strategy to reduce public spending while increasing state revenue
Kuwaiti Finance Minister Anas al-Saleh. Al-Saleh has proposed a drastic economic strategy to reduce public spending while increasing state revenue 

With the aim of advancing Kuwait’s economy beyond oil dependence and tackling the state’s mounting budget deficit, Minister of Finance, Anas al-Saleh, has proposed a drastic economic strategy to the cabinet. The series of reforms involve slashing energy subsidies and implementing a 10 percent corporate tax on profits in the hope of reducing public spending, while also boosting state revenue.

According to Reuters, on March 14, al-Saleh announced that the government seeks privatisation as well, which will see the sale of numerous state-owned assets, including schools, hospitals, ports, airports and segments of Kuwait Petroleum Corp. Al-Saleh’s plans also involve joining various governmental ministries and agencies, in addition to adjusting the prices of public services and goods.

These steps, though vital in the development of the Kuwaiti economy, require the authorisation of the parliament; given the highly sensitive reforms proposed, numerous obstacles can be expected as previous attempts have been resisted. For example, as recently as last year, similar plans were blocked and “postponed” by several members of parliament. Receiving public support for such drastic changes that will impact all citizens is another major challenge to overcome.

Kuwait is one of the most generous welfare states in the world. Being among the top 10 crude oil producers, the Gulf country has long provided a wide range of benefits for its citizens, including free healthcare and education, free utilities and job security for a lifetime. Such subsidies in fact spared Kuwait the fallout of the 2011 Arab Spring, unlike others in the region.

In spite of protecting the state and its people from social turmoil, amid collapsing global oil prices, heavy subsidies are inflicting a great deal of damage to the Kuwaiti economy. In January, it was revealed that due to low oil prices, the budget deficit for the last fiscal year rose to $40.7bn, an increase of almost 50 percent from the previous year.

Being that oil contributes a whopping 90 percent of governmental revenue, the need for economic diversification is urgent – as is the case with neighbouring countries as well. Yet, unlike Saudi Arabia and the UAE,which are currently undertaking such reforms, Kuwait continues to lag behind.

When a society is used to benefits, stripping them away is no easy task. However, given the current global landscape, change is crucial, and without it, both the population and the state have far more to lose than that which has been justifiably proposed by al-Saleh.