|International Monetary Fund (IMF), in its publication on Kuwait last week, issued an advice for Kuwait to use its Sovereign Wealth Fund (SWF) for handling the current budget deficit. However, such an advice is an ill one.|
IMF should know that every penny of that fund belongs only to our future generations. It should not be touched. There are other measures that can be used to deal with the current deficit.
We are aware that the overseas investments, which are worth close to $600 billion, belong to the future generations. It should stay as it is and should not be used by our generation, as the current generation has sufficient oil income to produce and generate the necessary funds for meeting Kuwait’s annual budget.
The advice IMF should have given to our government was to not misuse the daily income by spending more than $1.8 billion on free summer tours to Europe and USA in the form of overseas medical treatment for about 10,000 citizens who solicited help from our beloved MPs from the last parliament for this purpose.
Undoubtedly, transparency is essential when it comes to our SWF similar to Norway’s; however, as long as it is monitored annually by our parliament and the State Audit Bureau, we should be satisfied with our bookkeeping.
The problem facing our current deficit can be firstly handled by reducing the current subsidies and increasing the charges of water and electricity services, similar to the way the government increased the petrol prices and drastically cut down wastage of money on free tours of medical treatments for more than two companions of each patient.
Borrowing from outside, banks and financial houses is the other tool, with over $90 billion or more of easy oil under our land and backed with our overseas investments.
Of course, we can always use our annual returns of our $600-billion SWF but we also have our oil income, which annually comes up to more than $48 billion or KD 16 billion per year. Therefore, we are almost in a breakeven situation. So in reality, there are no deficits, as long as our government can control its expenses. Alas, this however is not part of its agenda.
This will eventually lead us to follow the ill advice of IMF. Sooner we add the income of our overseas investments to Kuwait’s income, the sooner our expenditures will balloon up and explode, which will, in turn, open the aptitude of both our government and our beloved MPs.
By Kamel Al-Harami
Independent Oil Analyst