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Kuwait general reserves plummet by third after coronavirus lockdowns and low oil prices

Kuwait has been hit hard financially by the coronavirus crisis [Getty]

Date of publication: 7 July, 2020

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Low oil prices and coronavirus lockdowns have forced the Kuwaiti government to tap into reserves.

 

Kuwait has used up one-third of its general reserves in just over a month, as low oil prices and coronavirus lockdowns hit revenues, while high government costs look set to deplete the Gulf state’s savings further.

The Kuwait government used up 1.5 billion Kuwaiti dinars ($4.78 billion) of its reserves in the past 38 days due to a rapid drop in revenues over the past months, local media has reported.

The General Reserve Fund - managed by Kuwait Investment Authority - has dropped from 4.5 billion Kuwaiti dinars ($14.34 billion) to 3 billion ($9.56 billion) this year.

The fund has been depleted for six years in a row, when oil prices dropped from highs of above $100 a barrel to current levels of around $40.

Kuwait has also enforced one of the most stringent lockdowns in the Gulf region to tackle the coronavirus crisis with nationwide curfews put in place in recent months.

The Gulf state's deficit has not been helped by its huge public sector bill, including a generous welfare state and large number of state employees.

Kuwait could run a deficit of 40 percent this year and will be unable to borrow due to a disagreement between parliament and the government.

It means the General Reserve Fund could be depleted this year or by April 2021, according to Gulf News, forcing it to tap into the Future Generations Fund, which has been earmarked for the next generation of Kuwaitis in a post-oil age.

The financial situation has also seen a number of measures enacted that target expatriates including a law that could see 800,000 Indians forced to leave the country.

Indians are Kuwait's largest expatriate community, sending home some $4.8 billion in remittances in 2018.

Last month, Kuwait Prime Minister Sheikh Sabah Al-Khalid Al-Sabah pledged to decrease the percentage of expatriates from 70 percent of the population to 30 percent.


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