Kuwait currently has two key financial strategies: One is to find new financing sources to the now depleted General Reserve Fund and the second is a serious Kuwaitization effort.
Yet the country still found time and money to help Lebanon restore its ability to store food, more particularly grain.
Kuwait to rebuild Lebanon’s Grain Silos
Kuwait said it will rebuild Lebanon’s only 120,000-ton capacity grain silo that was destroyed by the massive Beirut port explosion on Aug 4, Reuters reports.
The silo rebuilding was part of broader Kuwaiti assistance to Lebanon such as pledging $41 million at the French-organized donor conference held last Aug. 9.
Kuwait’s ambassador to Lebanon, Abdulaal al-Qenaie, said the silo was first built in 1969 with a Kuwaiti development loan, and the new project would be a show of brotherly love and respect the two Arab nations have for each other.
Plans for another grain silo in Lebanon’s second-largest port Tripoli were shelved years ago due to a lack of funding, a UN official, port official sources told Reuters earlier this month.
The new silo project cost, not yet revealed, might be a fraction of the $15 billion (bn) in damages done to Beirut’s infrastructure, but it’s noteworthy that Kuwait has its own serious budget issues to deal with.
Kuwait’s budget crunch
Kuwait is at risk of running out of cash for salaries unless parliament approves a debt law, the country’s finance minister Barak Al Sheetan said recently.
The government is withdrawing from its General Reserve Fund at a rate of 1.7 bn dinars ($5.56 bn) a month to plug the deficit, and liquidity will soon be depleted if oil prices don’t improve and if Kuwait can’t borrow from local and international markets, Al Sheetan announced.
Safaa al-Hashem, head of parliament’s financial and economic committee said the fund only had 1.1 bn dinars left ($3.6 bn).
Parliament recently failed to agree to the government’s bill to borrow up to 20 bn dinars ($65.4 bn) over 30 years. But MPs pushed the bill back to the finance committee for further study over the next two weeks, state-run Kuna reported.
Meanwhile, MPs passed a bill on sovereign wealth fund payments allowing to free up 3.8 bn dinars ($12.4 bn) of accrued money that would have otherwise been sent to the Future Generations Fund, Reuters reported.
Kuwait automatically transfers 10% of the state’s revenue every year to the Future Generations Fund, but the new law passed by the national assembly will now only allow transfers to the fund when the year’s budget is in surplus, which is not.
A Finance Ministry proposal for the Kuwaiti wealth fund to purchase 2.2 bn dinars of assets from the Treasury, in order to help boost liquidity, has also been carried out.
Kuwaiti Budget doldrums
Kuwait’s budget deficit increased 69% to 5.64 bn dinars ($18.44 bn) in the last fiscal year, and the government estimates it will more than double to 14 bn dinars ($45.8 bn) in the current fiscal year.
Wages and subsidies accounted for 76% of all spending.
More than 90% of the country’s revenue is generated from oil.
National Bank of Kuwait SAK, the country’s biggest lender, already predicts the budget shortfall will reach 40% of the gross domestic product (GDP) in the fiscal year that started April 1 or double what Fitch Ratings forecast a month ago.
In late May, according to a new survey by a Kuwait-based independent communications consultancy firm, Bensirri, 45% of companies polled in the country have shut down operations, 22% are experiencing difficulty getting financing and 80% won’t be able to cover more than six months of fixed costs.
Kuwaiti loans not affected by liquidity crunch
Despite the economic repercussions of the corona pandemic and the declining oil prices, Kuwaiti loans remain robust.
Total customer deposits at 10 Kuwaiti banks that announced their semi-annual financial results for the current year increased by 12, and reached 57.2 bn dinars ($187 bn) at the end of June with an increase of 6.2 bn dinars on last year.
The total customer loans and advances of the 10 Kuwaiti banks had a growth rate of 9%, reaching 53.5 bn dinars ($175 bn) at the end of June, an increase of 4.2 bn dinars.
The Public Authority for Manpower announced a ban on transferring government workers to the private sector, local media reported.
It also decided to enforce restrictions on the transfer of dependent visas to work visas, for those working in the private sector.
The dependent visa allows expats residing in Kuwait to sponsor their family members.
Prior to this decision, it was possible for an expat to switch their residency from a dependent visa to a work visa.
The decision to ban transferring government employees to the private sector comes a few weeks after the government announced that it will dismiss 50% of expats working in the public sector.
As of December 2019, there are 120,000 expats, out of the 3 million residing in Kuwait, working in the public sector. Back in 2018, around 50,000 expats working in governmental agencies were laid off.
Only 10% of the 1.4 million Kuwaiti population works in the public sector.
Recently, the Ministry of Interior issued instructions banning the conversion of all types of visit visas to residency permits. Holders of a visit visa can stay up to 30 days in the country from 60 days back in March.