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Tackling Kuwait's economic woes
June 22, 2013, 4:53 pm
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Last week’s ruling by the Constitution Court of ordering dissolution of the parliament and calling for a new election provides a fresh opportunity for addressing economic woes in Kuwait. It remains to be seen if the new legislative body would develop a functioning relationship with the government to tackle some serious economic issues facing the nation.

The election is due to take place on July 25, during the fasting month of Ramadan. The fasting month could start on July 9. Accordingly, real campaigning should take place during evening hours after breaking the fast.

Interestingly enough, the election date would most likely convince some Kuwaiti families delay the customary summer holidays to after Eid.  In retrospect, Iraq invaded Kuwait during the summer of 1990 when a large number of Kuwaiti nationals were vacationing abroad.

Anyway, it is hoped that the new parliament would work with the authorities for putting into the accumulated surpluses of successive budgets. Over the past few years, Kuwait has developed a habit of posting relatively large budgetary surpluses. For instance, in fiscal year 2012-13, the surplus amounted to US$52.3 billion or 30 per cent of the gross domestic product (GDP). Similar to fellow Gulf Cooperation Council (GCC) member-state of Qatar, fiscal year in Kuwait starts in April.

Undoubtedly, this is an exceptional statistic even by regional standards. To be sure, GCC countries are noted for posting budgetary surpluses on the back of steady oil prices partly for assuming relatively low prices in calculating the budgets. For example, Qatar used an average rate of $65 per barrel whilst preparing the budget for fiscal year 2013-14, thus considerably below the prevailing market rate.

Not surprisingly, petroleum revenues including gas make up around three quarters of treasury income in all GCC countries including Bahrain, in turn regarded as having the most diversified economy in the region. And in the case of Kuwait, the petroleum sector at large including oil refining and gas sales proceeds constitute nearly 85 per cent of both budgetary revenues and exports and 40 per cent of gross domestic product (GDP).

Undoubtedly, heavy reliance on the petroleum sector places Kuwaiti economy at the mercy of developments of the volatile oil market.

At the stake is finding a formula whereby the new MPs would approve spending projects in the country if only to encourage local investors to follow suit. Truth of the matter is that Kuwaiti investors are noted for having international outlook, and hence think and act global. Significant funds from Kuwait could be found anywhere in the world, as investors do not confine themselves to the local market.

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