Kuwait’s emir said on Tuesday a fall in oil prices cast a shadow over the OPEC member state’s economy, showing the need to diversify sources of income that rely heavily on petroleum.
In a speech to the opening of parliament, Sheikh Sabah al-Ahmed al-Sabah urged the assembly and the government to issue legislation to protect the country’s national wealth and safeguard it for future generations.
“I have appealed from this podium many times to …work to develop and build productive economic activities that provide opportunities for the youth to work, diversify the state’s sources of income and reduce the reliance of our economy on oil,” he said.
“And here we are seeing another cycle of low oil prices as a result of political and economic factors shaking the global economy, casting a negative shadow on our national economy,” he said in remarks carried by the official news agency KUNA.
Kuwait has long sought to develop its oil industry, and its non-energy companies are active in the region’s property, banking, investment and telecoms sectors.
But frequent deadlock in parliament makes it difficult to approve large projects involving foreign investment, and critics also point to the government’s frequent personnel changes, layers of bureaucracy and general lack of dynamism.
Global oil prices tumbled to four-year lows below $83 per barrel this month, threatening – if current levels are sustained for a long period – to push the state budgets of some of the six members of the Gulf Cooperation Council into deficit after several years of big surpluses.
There are some signs that officials in Gulf Arab states are using the oil price drop to justify reforms.
This month Kuwait revealed plans to slash costly state subsidies on diesel, kerosene and jet fuel – relatively minor reforms – and it is studying hikes in electricity and water costs that would have a bigger effect.
Lavish subsidies, mostly on energy, swallow about KD5.1 billion ($17.7 billion) annually in Kuwait, or roughly a quarter of the government’s projected spending this fiscal year, according to government figures.
The emir said the government and assembly should “protect our oil and financial wealth, which is not only ours, but is also the right of future generations we have to utilise to ensure the continued … growth of our national economy.”