There is almost unanimity among the Kuwaitis on two things – theimpossibility of dealing with the budget deficit under the currentadministration, especially with regard to the salaries item, and the weakgovernment ability to address the difficult economic problems, since fears arelooming over the horizon that the economy is bound for head on collision.
One of the solutions I have been calling for since 1993 is to return to the dinar exchange rate during the period of Saddam’s occupation of Kuwait, albeit gradually.
During the months of the occupation and the seven dark months, all of us accepted an exchange rate of two and a half dollars for one dinar, but immediately after the liberation of Kuwait, the government issued a decision keeping a political goal and the content in mind, completely devoid of economic prudence.
The decision is to return to the dinar exchange rate to what it was before the invasion and occupation – about three and a half dollars to the dinar – because this subjected the public money to great losses at the time and as member of the board of a bank, I estimated such losses at $7 billion due to the repayment of all of Kuwait’s internal debts including deposits and other accounts with funds from abroad by an additional dollar per dinar, especially that all holders of government debt and bank deposit holders were not dreaming of the return of Kuwait.
These people, including my father and relatives received all their deposits in the same old exchange rate, with bank interest, without deduction? The same thing happened with the hundreds of thousands of residents who transferred their bank accounts to their countries at the old price, and getting 10 percent of them was a dream one day.
Since this opportunity will not be available for the foreseeable or distant future, our distinguished government, weak or strong is under obligation to seriously consider the issue of gradual reduction of the exchange rate of the Kuwaiti dinar even for a period of two years. This waste is not acceptable as it is now.
I would say that I will be the biggest victim if the reduction in exchange rate is applied. I would pay a lot more dinars for the materials I import in the future but the national interest and future generations are more important in the long run.
I will also be affected by inflation, high prices, higher travel costs and other negative things. Good, nice solutions are always unpleasant.
We call for reduction although our external balance of payments is strong today, but who can ensure that this balance remains the same forever. The deficit in the state budget is growing for more than a year and the devaluation of the exchange rate will strengthen Kuwait’s reserves in dollars, or in any other foreign currency.
This reduction in exchange rate will also encourage Kuwait to increase the sale of its oil and other products, and encourage domestic industry and export expansion. It will reduce unwarranted consumption and tourism, and the reduction will have a negative impact on marginal workers whose income will be reduced in the currency of their country or in dollars by the reduction of our currency.
Family subsidies on food should be rationed, limited to low-income people, while fuel and electricity prices continue to rise gradually, and work in a progressive manner so that the low-income people or pensioners are never affected.
Economist Marwan Salameh believes that the devaluation of the dinar will, in general, lead the government to rationalize its spending and reduce the spending rate, especially the unjustified spending.
We write and say and ask … Perhaps there is someone who listens.
By Ahmad Al-Sarraf