Kuwait’s $65bn debt plan in peril after draft law rejected
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Kuwait’s $65bn debt plan in peril after draft law rejected

Kuwait’s $65bn debt plan in peril after draft law rejected

The bill was designed to raise as much as $65bn


The Kuwaiti parliament’s finance and economic panel turned down a draft bill that might have allowed the government to borrow at home and abroad just as liquid assets in the Treasury come close to being depleted.

“We rejected the public debt law, with 4 against and 1 abstention, because, in the absence of clear and real reform, things won’t be put right,” said the committee’s head, Safa Al-Hashem.

The government also failed to explain where any borrowed money would be directed, she said.

It was at least the second time officials attempted to get the contentious bill through parliament. After a debut Eurobond issuance in 2017, Kuwait’s public-debt law lapsed, rendering the government unable to offer bonds.

The bill was designed to raise as much as KD20bn ($65bn). Its rejection means it won’t move to the house for debate or a vote, leaving the government with the option of possibly seeking to issue the law by decree once the current legislature’s term ends ahead of elections later this year.

In the absence of access to debt, the government has been studying various alternatives to add cash to the Treasury. As part of that effort, the panel approved a proposal to halt the annual 10 per cent transfer of revenue to the Future Generations Fund in years when the government runs a deficit.

A Finance Ministry proposal for the wealth fund to purchase KD2.2bn of assets from the Treasury, in order to help boost liquidity, has also been carried out.

Kuwait’s budget deficit increased to KD5.64bn in the last fiscal year, up 68.6 per cent from a year earlier, on lower-than-expected crude prices and a drop in non-oil revenue.

National Bank of Kuwait estimates that was equivalent to nearly 10 per cent of gross domestic product.

The country’s biggest lender predicts the shortfall could reach 40 per cent of GDP in the fiscal year that started April 1.

“Despite further anticipated spending cuts, the deficit will widen sharply this year due to lower oil prices, putting more pressure on declining reserves and making the approval of the debt law absolutely essential,” analysts for National Bank of Kuwait’s economic research said in a report on Sunday.

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