Complex Made Simple

Kuwait in-fighting over corruption issues continues following passing of new budget

Famous for their squabbling, Kuwaiti pro and opposition parliamentarians again raised the level of their feud over delays in dealing with corruption charges during the passing of the 2021/2022 Kuwaiti budget

The budget, proposed by the government in January, had projected $76.65 billion in expenditure KIA, the $600 billion sovereign wealth fund, is caught in the crosshairs of a political power struggle There are allegations of bribe-taking, money-laundering, and influence-peddling by senior officials

Frequent rows between the Kuwaiti government and assembly have over decades led to successive cabinet reshuffles and dissolutions of parliament.

Famous for their squabbling, Kuwaiti pro and opposition parliamentarians again raised the level of their feud over delays in dealing with corruption charges during the latest passing of the 2021/2022 Kuwaiti budget.    

The budget rumble 

Kuwait’s parliament approved the 2021-22 state budget last Tuesday, June 22, but did not slow down a standoff between government and opposition that has blocked economic reforms and hampered decision-making at the Gulf state’s sovereign wealth fund.

The vote was supported by 32 out of 63 lawmakers in attendance including 50 elected members and government ministers, but it was tense and heated.

Parliamentary guards entered the hall to restore order as opposition and pro-government MPs quarreled.

“Our problem is not with the budget, it is with the government,” opposition MP Abdulaziz al-Saqabi said.

The budget, proposed by the government in January, had projected $76.65 billion in expenditure for the fiscal year that started on April 1, and a deficit of $40.2 bn.

Lawmakers want to question Prime Minister Sheikh Sabah al-Khalid al-Sabah over the constitutionality of a motion passed in March, delaying any questioning of the premier until the end of 2022 along with other issues such as corruption.

The deadlock appears to have spilled over to the Kuwait Investment Authority (KIA), the $580 billion sovereign wealth fund, where a new board has yet to be named since the existing board’s tenure expired in April.

KIA manages the Future Generations Fund, a nest egg for when oil runs out, and the General Reserve Fund, a smaller state fund used to plug the deficit.

Meanwhile, Kuwait’s anti-corruption body vowed to protect whistleblowers in a bid to give impetus to a sweeping anti-corruption campaign. 

Protecting whistleblowers, who are often the target of abuse on the part of those involved in nefarious actions, is among the watchdog’s priorities given its significance towards a national strategy to root out corruption, according to a statement released by the body. 

Read: Kuwait’s anti borrowing stance about to wilt under the pressure

Read: Kuwait’s non-oil GDP growth a positive amidst weak economic data

KIA’s power struggle, and a growing deficit 

KIA, the $600 billion sovereign wealth fund, is caught in the crosshairs of a political power struggle that’s roiling one of the world’s richest countries.

KIA has been in limbo since its board’s tenure expired two months ago. A new term has yet to be approved as political differences spill over into a disagreement over the make-up of the nine-member board, a source familiar with the matter said.

This is part of a broader malaise that’s paralyzed policymaking, prompted rating agencies to warn of downgrades, and perversely left the government of a major OPEC crude exporter scrambling for cash.  

Kuwait has so far refused to borrow and this lack of debt financing via international bonds left it with barely enough to pay public sector salaries and delayed investment and economic reforms, including an overhaul of the welfare state the government says is needed to end eight consecutive years of budget deficits.

Allegations of bribe-taking, money-laundering, and influence-peddling by senior judges and officials have as well dominated social media in recent months, as the government embarks on an unprecedented and very public cleanup it hopes will appease critics and pave the way to fiscal reforms that can get the economy back on track.

An ex-premier and other high-ranking officials have been arrested in the anti-corruption drive.

The government needs parliamentary approval for most major initiatives in its economic program, including the introduction of a VAT and an excise duty to boost non-oil revenues.

Kuwait is running a deficit of $3.3 bn a month. If the situation continues as is, Kuwait will build a cumulative budget deficit of $184 bn over the next five years.

The Kuwaiti economy contracted by almost 10% in 2020, worse than any of its Gulf peers except for neighboring Iraq.