KUWAIT CITY, July 20, (KUNA): Governor of the Central Bank of Kuwait (CBK) Sheikh Salem Abdulaziz Al-Sabah said Tuesday that, “there are many indicators in the global economy raising concern, but this does not make us worried, and does not beckon a new financial crisis.” Sheikh Salem added, in an interview with the Arabic news channel of CNBC today, that the Cabinet asked him to file a report on the possibility of a new global financial crisis, noting that he made a presentation in this respect, particularly as there are problems in the EU, and US related to the volume of sovereign debts. He also said that these problems are associated with unsatisfactory level of economic growth in the industrialized countries, besides soaring unemployment rate to unprecedented levels in these countries which primarily rely on the consumer expenditure. Sheikh Salem made clear that some countries did not take into account the fragility of some banking systems, pointing out that these conditions may lead to a decline in the demand for oil, which is the main, if not the only, source accounting for 92 percent of the finance of the Kuwaiti budget. He also said that the budget’s volume has rapidly grown over the past period, increasing five times in eleven years, a thing never seen by any other world country.

Demand
In case there is a growth in the non-oil revenues parallel to that one in the oil revenues, the soaring budget will be acceptable, particularly as, “we cannot control oil price or the output volume because the price is determined by demand and the supply is set by the Organization of Petroleum Exporting Countries (OPEC). CBK Governor also said that submitting the above-mentioned report to the Cabinet, “gave a chance CBK to play its prescribed role as it is set in article 15 of the bank’s founding law that provides for CBK as the financial consultant of the government,” noting that though the status quo is a comfortable one, all parties are in need of a future perspective to achieve sustainable conditions, and there should be an economic reform. Sheikh Salem also said that economic reforms start from the financial reform represented in readjusting the state budget, deeming it fixed one whether at the level of expenses or revenues with the oil prices determining the revenues, while there is a big growth in expenses.

He also made clear that current expenses account for 75 percent of the budget, “and government cannot change its future status.” Sheikh Salem asserted that current economic status in Kuwait is excellent, “though we should think about the future generations, and work through a clear-cut plan, particularly as all parties are making efforts toward state-building,” pointing out that this was a theme for a discussion with the Cabinet. He also said that there are three structural imbalances in the Kuwaiti economy: the first is related to budget, and it was dwelt upon, and the second is the government’s domination of the economic activity with sufficient opportunities available to investors in the private sector. Moreover, he stressed the necessity of giving the private sector a chance to play its due role in what will lead to redressing the imbalance in the state budget. As for the third structural imbalance, it is the unbalanced labor market with the incoming Kuwaiti labor needing jobs estimated at some 20,000 for new graduates, while predictions refer that in 2030 there will be 74,000 graduates, and the government cannot absorb all these numbers, “and so we should think about creating job opportunities through encouraging the private enterprises.”

Robust
Asked about his latest statements on the Kuwait Stock Exchange (KSE), CBK Governor said that these statements denote that, “Kuwait is in need of a robust financial market, an energetic private sector, and solid, investment-attracting business milieu in order to galvanize its economy.” He also said that the budget of (2011-2012) was set, after deducting the allocations of Kuwait Future Generations Fund (FGF), on the basis of an oil barrel price of $98 in what achieves economic balance, though it is a high and inflexible price. He added that oil barrel price which will achieve future economic stability in the country, namely a growth rate of five percent, must be $280 per barrel in 2020, “and consequently we should work carefully as economic reform should be a national process where all parties are taking part.” Finally, he said that the government’s focusing on banks over the last period was not an exception, because it was a policy adopted by all world countries, particularly after Kuwaiti government guaranteed deposits at a time when it was required to take some preventive measures to protect the depositors’ funds which amounted to KD 32 billion.