Subsidy phase-out by 2020 proposed

KUWAIT CITY, Feb 20: The government may decide to repeal all forms of subsidy by March 2020 if it implements the remaining aspects of the recommendations contained in the report of Ernst &Young, which the Ministry of Finance assigned to prepare the roadmap for subsidy reform, reports Arab Times daily.

A source noted the report was ready a few months ago but was kept under wraps to avoid undue parliamentary reaction, adding its implementation is not binding until all concerned authorities approve of it.

He explained that the government had already applied certain aspects of the recommendations regarding fuel, electricity and water subsidies. He also said power subsidy forms around 71 percent of subsidies in Kuwait. Four major steps have since been proposed for future action.

The steps include gradual reduction in the rate of fuel subsidy, and prices of electricity and water will also be increased gradually to reduce the rate at which a raise in prices will affect consumers and the economy. As for aviation fuel, the report advised the government to remove subsidy for foreign companies since it appears the purpose of doing that has not been met.

However, there must be a way of assisting it to be competitive in the international market before removing its subsidy. The last of the four steps is about liquefied gas whose price the report recommended a thorough study to restore its proper market value.

The report recommended gradual removal of subsidies from other sectors such as the overseas medical treatment, which covers about 6 percent of the subsidies.

The same recommendation was for education sector that consumes 4 percent of the subsidies, in addition to social welfare that consumes 5 percent of subsidies, rent allowances that covers 4 percent, social aid that accounts for 1 percent and inflation allowance 4 percent. Others include financial support of 3 percent, media support of around 0.01 percent, and agriculture and fishing sector that consumes less than 1 percent of the entire subsidies.

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