KUWAIT CITY, March 19: The National Assembly approved a new debt relief scheme for citizens in its first deliberation on Tuesday, despite reservations by the executive authority.

The debt relief bill establishes a Family Fund that will purchase the remaining principal of the loans taken by citizens from Jan 1, 2002 and March 30, 2008.

Thirty-three MPs voted for the bill, three MPs voted against it, while 20 MPs abstained, including all state ministers present. Another round of voting, expected in a few weeks, is needed to fully pass the law.
Prior to the vote, State Minister for Cabinet Affairs, Sheikh Mohammed Al-Abdullah Al-Sabah said “Cabinet ministers will abstain as a sign of cooperation until fundamental amendments on the bill are reviewed”.

Minister of Finance Mustafa Al-Shammali said the law needs further technical and cost clarification to accurately implement the Family Fund agreed upon.

Al-Shammali, who had reached an agreement with the legislative authority to establish the fund last week, expressed reservations on the bill, saying the total costs on the national reserve have not been determined.

He added he initially agreed with the Financial and Economic Affairs Committee to establish the fund but, according to the technical legal committee studying the matter, the bill requires more accurate workings.

“The costs for setting up the fund range between KD 1 to 4 billion due to the lack of a financial limit in the bill and the inclusion of Islamic banks and financial institutions and those who’ve settled their debts. The costs are not clearly defined,” he explained.

The minister, however, assured citizens that their problems in the end would be permanently resolved. In previous years, Al-Shammali had opposed debt relief plans for citizens, proposed by past parliaments, due to their “negative economic consequences”.  

The debt relief bill establishes a Family Fund from the public reserve that will purchase the remaining principle loans taken by citizens from Jan 1, 2002 and March 30, 2008 from conventional and Islamic banks and financial institutions.

The process seeks to waive the interests on those loans and reschedules the repayment in easy installments that do not exceed 40 percent of the debtors’ income.

Excluding the loans taken from Islamic banks and others, there are a total of 66,555 loans according to lawmakers. Expatriates are not mentioned in the bill, contrary to earlier indications by a few MPs.

Lawmakers were divided over the bill and the costs the fund will take from the state reserve. However, “the local banks violated lending rules during the citied period overcharging borrowers in interest and the Central Bank was weak in its oversight”, they agreed.

On his part, Chairman of the Financial and Economic Affairs Committee Yusuf Al-Zalzalah lamented that the Finance Minister wants to delay the plan’s implementation and charged that there are entities seeking the dissolution of the parliament and to hinder any achievements through it.

He said the costs were already established by the committee - KD 720 million if the bill excludes Islamic banks and KD 930 million if it includes Islamic banks.

MP Ahmad Lari, meanwhile, said the costs will be KD 900 million according to Kuwait’s Central Bank Governor.

Objecting to the bill, members of the parliament’s Independent Bloc said their proposal to obligate the banks to refund the overcharged interests taken from the borrowers, which were above the limit rate of 4 percent, was the ideal solution to the problem.

“We shouldn’t be rewarding the offending banks and financial institutions by giving them billions instead of holding them accountable for the illegal interest rates that were imposed on debtors between 2002 and 2008,” they said.

On his part, Speaker of Parliament Ali Al-Rashid assured that the banks will not benefit from the law, but “will incur losses of KD 300 million” in defaulted interest.

MP Salah Al-Atiqi, however, charged that lawmakers were approving the law for political reasons and that this bill is unprecedented in the world.

He warned that waiving interest could result in the collapse of the credit system or a financial crises.
Following the heated debate, the Assembly gave the bill its initial approval with 33 MPs voting for it, 3 MPs voting against it and 20 MPs abstaining.