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HH the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah received visiting Gulf interior ministers
‘Subsidies drain State budget’ No decision yet ... Review underway

KUWAIT CITY, April 30, (RTRS): Energy subsidies are draining Kuwait’s public budget, the Gulf state’s finance minister said on Wednesday, as the government carries out a spending review to help avoid a budget deficit as early as this decade. Subsidies in the major oil producer are expected to cost KD 5.11 billion ($18.2 billion) next fiscal year to cover items like fuel and energy.

Kuwait’s growth model has generated large improvements in living standards and welfare, Finance Minister Anas Al- Saleh told a conference cochaired by the International Monetary Fund (IMF). “However this growth model has involved many costs. The public sector wage bill is currently very high as a percentage of public spending, subsidization of basic goods is exhausting our state budget,” he said.

The IMF says Kuwait, one of the world’s richest countries per capita, could have a budget deficit as early as 2017 if it keeps spending at the current rate. Kuwait estimates this could happen by around 2021. It has posted a budget surplus for at least the past 15 years, according to latest available data. Policymakers have intensified calls for economic reform, but any changes are likely to face resistance from the elected Parliament and prove unpopular in a country which provides a cradle-to-grave welfare system for its citizens.

Analysts say extensive social spending programmes are one of the reasons why Gulf Arab states such as Kuwait, which has no income tax, have been shielded from the kind of Arab Spring unrest seen elsewhere in the region. Results of the subsidies review are expected this year. Kuwaiti newspapers have reported that the government is considering lifting subsidies for expatriates, who make up two-thirds of the population. Saleh told reporters on Tuesday that nothing had been decided yet.

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