Legislative amendment required
KUWAIT CITY, May 5: There is a move to increase the capital of Kuwait Credit Bank from about 750 million dinars to 3.75 billion dinars, in order to cover the additional financial burden assigned to the Bank to meet the new distribution strategy of the Public Authority for Housing Welfare (PAHW), reports Al- Rai daily.
According to the sources, this requires a request for a legislative amendment to increase the bank’s capital, which has been the subject of discussions among several competent government agencies.
The sources pointed out that the mentioned sources said that “another increase will be requested in the short term, and that until now there has not been a sustainable formula away from the General Reserve Fund to finance housing loans, not to mention the substantial decline in the assets of the Fund and the lack of cash to finance the deficit in the state budget for more than two or three years to come.”
The sources pointed out that the draft amendment law is based on three main axes: Covering the additional financial burdens assigned to the Bank to meet the new distribution strategy of the PAHW by distributing 12 thousand units annually; provision of mortgages of all types to citizens, whether for construction, purchase, expansion or repair provided by the bank and loans made in soft installments and exempt from any taxes, or interest, which affect the liquidity available to the bank.
The economic entities asked to express their opinion on the project considered that the increase is not possible, specifying 7 main reasons behind this: There is an urgent need to find a practical and sustainable form of housing loans, through the adoption of the real estate law, which directs local banks to contribute to the provision of housing loans to eligible citizens, and the credit bank to pay the interest of these loans to local banks.
The needs of the credit bank must be studied after the adoption of the mortgage law, and a comprehensive vision of its financing needs, and then study the feasibility of increasing capital. The bank has the financial possibilities and cash liquidity to enable it to meet the loans required until the adoption of the law on mortgage and the state budget faces a financial deficit due to the decline in oil revenues, and it is not expected in the near future to change this situation.
This is in addition to the general reserve that provides liquidity to cover the deficit. Since 2015, the general reserve assets have fallen by more than half. It is not expected that the Fund will be able to meet the needs of the State budget for more than two or three years to come in the light of future forecasts of oil prices and annual expenditures of the State and the credit bank explained its request for the purpose of fulfilling its financial obligations due to the new distribution strategy of the PAHW, which aims to distribute 12,000 housing units annually.