(MENAFN - Kuwait News Agency (KUNA)) The Governor of the Central Bank of Kuwait (CBK) Dr. Mohammad Al-Hashel said Sunday economic reforms in the Gulf country should be a national inclusive project consisting of "legislative and institutional" initiatives.
At the yearly news conference, Al-Hashel said reports and studies have shown "chronic" challenges facing business environment in Kuwait which contributed to structural disorder of local economy.
The challenges are related to legislative and institutional infrastructure, as well as obstacles hampering the implementation of giant development projects, failure to comply with disclosure, transparency and governance, in addition to political disputes, he said.
Al-Hashel called for the improvement of business environment through cutting red tape procedures and expansion of private sector's role in pushing forward economic development.
He called for issuing new legislations to issue government sukuks.
"It is necessary to act actively to push forward the comprehensive economic reforms through a bundle of policies and integrated measures, which will contribute to improving economic environment, reducing red tape measures and boosting efficiency of government's performance," said Al-Hashel.
The governor said the local banking sector, which has solid capital and expertise, could contribute towards the implementation of the feasible development projects On the recent visit of the International Moentary Fund's (IMF) chief Christine Lagarde to Kuwait, Al-Hashel Lagarde commended Kuwait's monetary policy and urged the CBK to adopt precautionary policies to addres financial risks.
On the spending of Kuwait's government, Al-Hashel said the increase of expenditure and dependence on oil revenues were hampering sustainable economic development.
He called for linking incentives of the government job with productivity and discipline.
Al-Hashel said the private sector should be given a bigger role to collecting bills of government services like electricity and water, as well as placing a "sophisticated tax system that will boost the general budget."
Governor Al-Hashel said Kuwait, along with Bahrain, Saudi Arabia and Qatar, signed the GCC Monetary Union treaty, which came into force on February 27 2010.
The treaty, he added, called for the establishment of the Gulf Monetary Council which consisted of monetary institutions and central banks of the Gulf Cooperation Council (GCC) countries.
This Council, he said, would pave way for the establishment of the Gulf Central Bank to ultimately issue the single currency.
The council, which was completing its structure, named Dr. Khaled Al-Saad as Executive Officer on August 12 2012.
On the Kuwaiti Dinar's exchange rate against other currencies, Al-Hashel said the KD has been pegged since May 2007 on a "special and balanced basket of currencies of the major countries with which Kuwait has strong commercial and financial relations.
"This method provides suitable flexibility to absorb imported inflation pressure which are caused by fluctuations of exchange rates, which thus provides relative stability for the KD exchange rate against major currencies," he said.
Asked about the foreign currency reserve, Al-Hashel said it grew from KD 5.1 billion in 2009 to KD 8.3 billion last year, or by 12.6 percent.
Asked about the real estates, Al-Hashel said the CBK has specified as 15 years the maximum time for a borrower to pay back the housing loan, whose value should not exceed 15-fold of the monthly salary.
He said the housing loans were very organized because they were linked with the wages of the borrowers, the majority of them work in the government sector.
Governor Al-Hashel was asked about the Basel III reforms, and explained the reforms were developed by the Basel Committee on Banking Supervision with the objective of strengthening regulation, supervision and risk management of the banking sector.
He said CBK was complying with the Basel III in terms of capitals of local banks, which should be within limits that enable them expand their operations.
Al-Hashel, meanwhile, said opening of branches of foreign banks would improve competitiveness within banking sector thus improve services and create jobs for Kuwaitis.
The opening of these branches, he added, was a positive factor towards establishing a regional financial hub in Kuwait.
On the Islamic finance industry in Kuwait, Al-Hashel said it needed religious opinion providing the risks facing the banking transactions.
"The Kuwaiti market has reached a balancing phase between the traditional and Islamic banking, as there are five Islamic banks and five traditional banks in addition to a foreign Islamic bank branch," he said.
On the personal loans, the CBK chief said the monthly installment should not exceed 40 percent of the net wage of employee and 30 percent of retiree, in order to guarantee the borrower's income would not be dramatically affected.