DESPITE the breathtaking efforts exerted by traders in Kuwait Capital Market, the effects of the fever continue to raise the losses index after the speculations fell under the incidents throughout last week. The precautionary measures approved by countries, in addition to the falling oil prices, heightened the frustration of traders such that the decline in oil prices has become psychological as in other sectors of the economy.
There is no doubt that this incident has an effect that will soon reflect on the financial status of Kuwait, just like it does in various countries. Therefore, urgent procedures are imminent to protect individual and corporate assets, which are under threat now more than before. This is especially considering the fact that the coronavirus spread continues to expand with corresponding low rate of buying and selling in the markets in all countries, not only in Kuwait. This means we are in the eye of a critical storm.
This situation deserves a decisive stance from the Central Bank of Kuwait to which we return again to say: You are entrusted with the country’s financial status, and ensuring to avoid waking up with disaster after few days and finding ourselves in a fix. It is mandatory to take bold steps to avert decline in the capital market, as well as prevent certain opportunistic activities to obtain people’s monies and assets under the pretext of recovering debts or delayed payment of installments for loans granted clients and companies with collateral, be it real estates, shares or others.
The collateral presented to the banks have already lost their original values amid the economic deterioration arising from the overwhelming situation in which clients or companies had a hand. The Central Bank of Kuwait refuses to reschedule debts, which forces banks to sell the assets that were put down as collateral. It increases the number of litigation, seizures and takeover of property as an effort of the banks to recover the loans without considering the unusual depressing situation. They just implement the orders of the Central Bank of Kuwait.
All this is expected today in the absence of the Central Bank’s role in protecting people due to the prevailing situation, which surely attracts many negative aspects and bounces back on the country’s economic situation. These negative aspects will not stop at the end of the current crisis but will continue on a long judicial trend to conclude the cases.
In order to forestall all this, the Central Bank of Kuwait should instruct the banks to be more lenient by granting their debtor clients and companies more time and rescheduling delayed payments. They should reduce the loan interest rates, because maintaining the current rate will complicate the economic paralysis in the country. It has already been suffering from contraction due to the global situation, especially after the massive decline in oil prices, which will undoubtedly restrain government’s investment expenditures.
Also, the banks should understand the condition of their debtor clients and companies to avoid falling into more serious problem beyond the officials’ imagination because the inability of some clients to pay will result in economic instability.
The efficacious treatment for all this is through resilient procedures imposed by the Central Bank of Kuwait on the local banks. Through this, the debtors can be assisted to overcome the crisis, especially since the prevailing unusual situation requires fiscal incentive from the state, as done and still being done right now in most countries around the world. This is particularly in relation to protecting debtors and companies, such that those countries prevent commercial banks from taking any step against any defaulter.
By Ahmed Al-Jarallah
Editor-in-Chief, the Arab Times