According to the new rules, from the Ministry of Commerce and Industry in Kuwait, foreign investors will now be able to own and trade in shares of banks in the country. However, special permission from the Central Bank of Kuwait (CBK) would have to obtained if the ownership exceeds five percent of the bank’s capital, said a statement from the ministry.
The statement noted that many of the foreign investors who approached the ministry with the intent of investing in the country’s financial sector had identified a number of obstacles and restrictions imposed. One such hindrance was the maximum percentage of non-Kuwaiti investors’ ownership in a single bank, which is not supposed to exceed 49 percent of the bank’s capital, unless permission is given by the cabinet and the Central Bank.
The decision by the ministry aims to cultivate a positive investment environment for non-Kuwaitis on the Kuwait Stock Exchange and in line with the state’s vision on creating an attractive environment for foreign investments. Moreover, the move aims to help attract foreign investors to the country’s large and influential banking sector set with a capital market value of KD11.11 billion.
Previously, acquisition was limited to 49 percent of the bank’s capital without obtaining the prior approval of the Council of Ministers which consults with the Central Bank of Kuwait.
Meanwhile, a new report from National Bank of Kuwait shows that the country’s budget deficit, which narrowed to 9 percent of GDP in FY17/18 from nearly 14 percent of GDP a year earlier, is forecast to narrow further to just 0.5 percent of GDP and portends a balanced budget for this fiscal, which would be the first balanced budget in four years.
Despite a recent fall, oil revenues – worth 90 percent of the total – are projected to rise 27 percent in FY18/19 based upon an average price of Kuwait Export Crude of $68/bbl, before slipping next year as oil prices fall back. Nonoil revenues are projected to see notable rises due to the resumption in 2018 of UNCC compensation payments. The reduction in the deficit over the past two years has seen the government switch tack and boost spending to support the economy. After rising 9% last year, spending is projected to see another solid rise of 5% in FY18/19, boosted by some one-off factors but also higher transfer payments due to rising oil prices.
Also, the current account has recovered and is set to record a surplus of 15 percent of GDP in 2018. The country’s current account had fallen into deficit in 2016, the first time in modern history. The improvement in current account for this fiscal came largely on the back of a 32 percent increase in oil exports and fueled by higher global oil prices.
On a related economic note, it was reported that Kuwait Investment Authority (KIA), the country’s sovereign wealth fund manager saw no conflict of interest in a potential merger between Kuwait Finance House and Bahrain’s Ahli United Bank.
In July of last year, Kuwait Finance House and Ahli United said they started talks for a potential merger that may create a lender with about $92 billion in assets. HSBC Holdings Plc and Credit Suisse Group AG are assisting the lenders with the process.
The KIA currently owns 24.1 percent of Kuwait Finance House while the country’s Public Institution for Social Security (PIfSS) owns 18.7 percent of Ahli United, while Kuwait’s finance minister remains the chairman of both, the KIA and the PIfSS. But according to a statement from KIA this does not constitute a conflict of interest.