(MENAFN- Arab Times) Kuwait on Monday ordered Cabinet ministers to "rationalise spending" after considering measures to counter the sharp decline in oil prices, an official statement said. "The government asked ministers to control expenditure and rationalise spending in such a way to serve citizens and achieve the country's higher interests," said a statement following the weekly Cabinet meeting.
The statement said the Cabinet had studied proposals presented by the finance ministry about the slide in oil prices and "emphasised it will continue with capital spending and projects under the development plan". Finance Minister Anas Al- Saleh made a presentation about the main features of the new budget, said Minister of Cabinet Affairs Sheikh Mohammad Abdullah Al- Mubarak Al-Sabah in a press briefing following the Cabinet meeting, headed by His Highness the Prime Minister Sheikh Jaber Mubarak Al- Hamad Al-Sabah.
He added Governor of the Central Bank of Kuwait (CBK) Mohammad Y. Al-Hashel, Finance Ministry Undersecretary Khalifa Hamada and several senior Finance Ministry officials briefed the Cabinet about the value of the expected state income and expenditure.
They also presented to the Cabinet a number of proposals and recommendations to deal with the repercussions of the recent drop in oil prices without affecting spending on investment and development projects. Following the deliberations, the Cabinet expressed appreciation of the efforts exerted by the Finance Ministry and other relevant state bodies to prepare the budget and urged all state bodies to make the best use of budget allocations to achieve the state interests and meet people's needs. Then, the Cabinet was briefed about Central Bank of Kuwait's Financial Stability Report (FSR) of 2013 which analytically examines key developments in all three areas of the financial system; institutions, markets and infrastructure, with an aim to identify the risks to the stability of the financial system.
The CBK report covers in significant detail the performance of the banking system, assessing their role as financial intermediaries, their management of various risks and their ability to withstand major shocks.
It evaluates the functioning of key domestic markets, including the money market, the foreign exchange market, the Kuwait Stock Exchange and the real estate market, as well as their implications for the banking system. Finally, the FSR also highlights the trends in the payment and settlement system. Oil income makes up around 94 percent of public revenues in the emirate which pumps around 3.0 million barrels per day. Oil prices have lost around 30 percent of their value since June, amid a surplus in supplies and a weak global economy, hitting the state coffers of energy-dependent countries like Kuwait.
The head of Parliament's budget committee, lawmaker Adnan Abdulsamad, has said if oil prices continue at the current level, the budget surplus would shrink to just $3.1 billion from $45 billion last year. Kuwait has decided to end subsidies on diesel, kerosene and aviation fuel as a first step in revising heavily-subsidised electricity, water and petrol. Local media said Kuwait's fiscal reserves grew to $548 billion as of June 30.
The Cabinet, in its weekly meeting at Seif Palace Monday, discussed the proposed state budget for the fiscal year 2015/2016. Kuwait's government is looking at adjusting its petrol subsidies in order to reduce waste, a senior Kuwaiti official said on Monday in a fresh sign that authorities are using this year's oil price plunge to push economic reforms.
For years, the government refrained from cutting lavish and growing energy subsidies because of political sensitivities. But last month, it said it planned to raise domestic prices of diesel fuel and kerosene. Ali Sabt bin Sabt, acting undersecretary at Kuwait's oil ministry, told Reuters on Monday that the government was now also looking at petrol subsidies. A petrol price hike would probably have a much bigger impact on consumers than the diesel and kerosene changes. "You need to do something about subsidies.
Maybe a producing country can turn into a consumer country," Sabt said on the sidelines of an energy conference in Abu Dhabi, referring to concern that ultra-low domestic prices are encouraging Kuwait's petrol consumption to balloon as its population grows, potentially eating into its oil exports. "We need to put policy on it.
We need to put an order to it so we can do something regarding consumption." Sabt added, "Yes, we are looking at petrol specifically. It is subsidised and ... that is increasing. As population is more and more, we have to do something in this regard." Asked whether the government might double petrol prices in the future, he said: "Not doubling, but it is under study ... It is not yet decided."
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