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Thursday , April 22 2021

Oil prices to determine the state of general reserve’s liquidity rate

KUWAIT CITY, Dec 12: According to informed sources, the volume of liquidity currently available in the general reserve is close to about KD 1 billion. The stability of the liquidity rate during the coming months or its depletion will depend on the movement of oil prices in the near term, reports Al-Rai daily.

They affirmed that the salaries and wages of the month of December will be disbursed to government employees, and those of similar status on the usual dates. However, the continued dependence in covering the budget deficit by withdrawing from these funds will exacerbate the general reserve crisis in the coming period, and increase the risk of liquidity depletion. This precipitates exposure to the stage of governmental inability to fulfill its financial obligations, under pressure from its liquidity crisis and the budget deficit that is expanding daily.

The sources said, “One of the difficult scenarios set forth in the Ministry of Finance is that, if the oil prices fall in the coming period to levels of the crisis period when the prices ranged between $ 27 and $40, Kuwait will be facing high risks for not being able to cover deficits and fulfill the due obligations.

The price of a barrel of Kuwaiti oil reached $48.79 in trading last Wednesday.

In practice, the government continues to regularly pay its obligations, especially salaries, for six consecutive months, despite the hints given by the government more than once of the possibility of incurring a salary deficit.”

The sources stressed that the government, during the past months, was able to secure an additional liquidity of approximately KD 4 billion through exceptional non-recurring suppliers next to the traditional oil revenues, namely the transfer of the ownership of liquid assets from the General Reserve Fund to the Future Generation Fund with a value of approximately KD 2.1 billion, in addition to put a halt on deduction of the future generations’ share of ten percent of public revenues, which accounted for about KD 1.7 billion in the last fiscal year.

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