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The New Arab Staff

Kuwait central bank denies dinar headed for devaluation

Kuwait is battling its biggest-ever budget deficit [Getty/ Archive]

Date of publication: 4 October, 2020

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Speculation about an impending devaluation arose after the passing of Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah earlier this week.

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Kuwait's central bank on Sunday denied reports saying that the Kuwaiti dinar is headed for an imminent devalutation, as the country battles with its biggest-ever budget deficit.

Twelve-month forward contracts on the Kuwaiti dinar rose almost 60 points to 270 in the offshore market at the end of last month, according to Bloomberg, signalling concerns about an impending devaluation.

Kuwait's dinar is pegged pegged to a basket of currencies, including the greenback.

"In light of recent online reports falsely speculating on the intent to devalue the national currency, the Central Bank of Kuwait reiterates its commitment to maintaining the Kuwaiti dinar exchange rate at a level that protects its purchasing power," the Central Bank of Kuwait said in a statement on Sunday.

"CBK will continue its adherence to policies that aim to bolster the local currency and maintain monetary and financial stability."

Speculation festered following the death of Kuwaiti ruler Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah in the United States on Tuesday. Sheikh Sabah, who was widely respected as a stablising figure in the Middle East, was succeeded by his 83-year-old brother.

While many observers expect Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah's reign to be one of continuity, the tiny Gulf state is faced with serious economic challenges exacerbated by the coronavirus pandemic.

In August, Finance Minister Barak Al-Sheetan told Kuwaiti lawmakers that the treasury has only 2 billion dinars ($6.6 billion) of liquidity and not enough cash to cover state salaries beyond October.

Attempts to seek loans to solve the liquidity crisis have been been blocked by lawmakers opposed to a law that would allow the government to borrow.

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