$75/bbl is bare minimum to pay salaries in Kuwait

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IN ORDER to meet our government’s annual salary of KD 16 billion, the oil price should reach $70 on a daily basis for a full year. Any figure below this will cause scratching of the head to find the necessary funds from different resources. At the same time, the level of salaries will be increasing on a yearly basis due to the entry of new graduates in the labor market. Also, our government is forced to hire very eligible Kuwaitis, which is a must in our constitution. The recent surge in oil prices gave our government hope that a price of $70 per barrel could ease the pressure on it.

Kamel Al-Harami

However, this hope was short lived, as the prices have gone back to low 60s, which is not good. This forces us to go back to the blackboard in search for viable solutions. Depending on oil as the sole source of income is no longer an option, as most of the oil experts expect the oil prices will not revive in the coming months, and considering the fact that the market is still weak and fragile.

This is the main reason behind Saudi Arabia’s decision not to put one million barrels into the market during the last two months and this might continue for another month into April. This is because there are no signs of any increase in the demand, and this could continue for some time. We in Kuwait have to remember that the oil price must reach $70 a barrel in order to be able to pay salaries.

We also need an oil price of $90 per barrel to balance our total budget. This is another hard and tough challenge for the government. Again, we have to dig into our reserves and overseas assets or borrow from local and international banks. The question however is whether to remain, and for how can we go on borrowing. This is a question that is being asked daily by all of us. This question represents the stumbling block for our parliament’s hesitation in approving the government’s loan request. Increase in oil prices is not the solution but replacing oil with other sources of income is.

By Kamel Al-Harami Independent Oil Analyst

email: [email protected]

This news has been read 36642 times!

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