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Kuwait can only cover government workers' salaries until October, warns minister, amid worrying cash crunch Open in fullscreen

The New Arab Staff & Agencies

Kuwait can only cover government workers' salaries until October, warns minister, amid worrying cash crunch

Date of publication: 20 August, 2020

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Kuwaiti lawmakers have stalled annual payments to a sovereign wealth fund as the cash-strapped Gulf state assesses its options.

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Kuwait's treasury has only 2 billion dinars ($6.6 billion) of liquidity and not enough cash to cover state salaries beyond October, Finance Minister Barak Al-Sheetan told the country's parliament on Wednesday.

With the Gulf state currently withdrawing from the General Reserve Fund at a rate of 1.7 billion dinars ($5.5 billion) per month, the country could soon face a liquidity crisis unless it is bailed out by lenders or oil prices improve, Al-Sheetan added.

"In the medium to long-term, in the absence of borrowing, more austerity measures will have to be applied to public spending," the minister was quoted by Bloomberg as saying.

"In several decades, the FGF will run out, affecting the welfare of citizens and the state," he added, referring to the state's Future Generations Fund - a fund that aims to act as a buffer for when Kuwait's oil reserves run dry.

Kuwait's parliament on Wednesday passed a law restricting transfers of state revenue to sovereign wealth funds, halting automatic transfers of 10 percent of annual revenue to the FGF.

The decision aims to inject over $12 billion "in much needed liquidity to the treasury", according to Reuters.

Transfers to the FGF will now only occur when Kuwait's budget is in surplus.

However, lawmakers also returned a public debt law that would allow the government to borrow 20 billion dinars ($65.4 billion) over 30 years to a parliamentary committee for two weeks of further study.

Oil-rich Kuwait faces a deficit of 14 billion dinars ($46 billion) in the current fiscal year, which began on 1 April.

The economic situation in the Gulf has been highly affected by the global drop in demand for oil after the outbreak of Covid-19.


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