Kuwait government’s need to pass a law on public debt that would enable it to borrow 20 billion dinars ($65.3billion) over 30 years “is still urgent and necessary,” Finance Minister Barak al-Shitan said on Sunday.
The finance and economic committee has also suggested reducing the period for borrowing, Shitan added after meeting lawmakers.
The public debt would not exceed 60 percent of gross domestic product and proceeds would go to infrastructure and development projects, he told reporters after meeting the committee.
The government will study an idea to lower by half the ceiling on public debt as part of proposed amendments to a law it’s struggled to push through parliament, he noted.
Kuwait has two billion dinars ($6.6 billion) worth of liquidity in its Treasury and not enough cash to cover state salaries beyond October, he has earlier noted.
“The government is withdrawing from its General Reserve Fund at a rate of 1.7 billion dinars a month, meaning liquidity will soon be depleted if oil prices don’t improve and if Kuwait can’t borrow from local and international markets,” he said.
The panel has proposed reducing the limit from 20 billion dinars ($66 billion) to 10 billion dinars, said the committee’s head, Safa al-Hashem.
The proposal suggests that the law be reconsidered within three years in terms of the debt ceiling and repayment period, Hashem added, provided that the next finance minister presents a complete economic reform program on the way to cut expenditure, boost revenue, and lay out clear repayment mechanisms.
Kuwait is going through one of its worst economic crises due to the COVID-19 outbreak and the decline in oil prices – given that oil is the key source to fund the general budget. Before that, the deficit in Kuwait was expected to reach KWD7.7 billion ($25 billion) for the fiscal year from April 1 to March 31.
The government and parliament have long been at odds over the law that would allow Kuwait to tap international debt, but the issue has gained urgency in recent months due to the COVID-19 pandemic and low crude prices.
