Economic solutions presented by govt will not solve crisis

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KUWAIT CITY, June 7: Participants of a forum titled “Corona Crisis from Health to Economy”, which was held electronically unanimously agreed that the economic solutions presented by the government recently to confront the COVID-19 pandemic are temporary and will not completely solve the economic crisis.

Manaf Al-Hajri

Demanding real economic reforms, the participants stressed that Kuwait needs a real reform movement in institutions so that they can be “sterilized” from corruption and create real institutional distinction based on a longterm vision and specific features.

They insisted that the people of Kuwait are the ones paying the price for the delay in economic reforms. The economic experts who participated in the forum were the CEO of Kuwait Financial Center Company “Markaz” Engineer Manaf Al-Hajri, Professor of Budget Management and Public Finance at the College of Business Administration in Kuwait University Dr. Barak Al-Gharabally, and economic expert Abdulaziz Al-Hudaib, with an intervention from MP Osama Al-Shaheen. It was moderated by journalist Khaled Al-Abdul Ghafour.

The CEO of Kuwait Financial Center “Markaz” Engineer Manaf Al-Hajri said, “We are living in a very difficult period today due to the corona crisis. Everyone is facing life, career and economic challenges. The economic model in Kuwait is an oil-democratic model based on multiple thinking, freedoms and institutional model, but it is from a different perspective, as it is a rentier model that relies heavily on petroleum as the only source of national income and suffers from a significant weakness in its productivity and structure. Therefore, the sustainability components of this model are very weak.”

Al-Hajri stressed the importance of potential for trust, which is evident in several things, including creating real reform action in institutions that can lead to “sterilizing” them from corruption, which will result in institutional excellence and real reform. He called for work to achieve long-term development goals with an agreement on the implementation mechanism. Regarding the public debt project, Al- Hajri explained that, “The debt is due, and we are today in a low-interest monetary environment. If Kuwait borrows today, the cost of borrowing would be much lower than last time and the country would avoid liquidating assets in a period when the markets decline signifi- cantly and thus achieve realized losses. However, we cannot forget that Kuwait borrowed in 2017 and the result of borrowing was not clear.

Meanwhile, there is inflation in the government apparatus and a poor record in development. Today we are witnessing a shift in the speech that we hear from public opinion “from some voices” that the solution to the problem of corruption is Kuwaitization.”

Al-Hajri clarified that he does not oppose prioritization of Kuwaitis for job opportunities, and there are marginal workers in Kuwait, but there are also jobs that need expatriates. He said the racist psyche against some communities and nationalities affects Kuwait’s relationship with other countries, which is unacceptable to him. Meanwhile, Dr. Barak Al-Gharabally, a professor of budgets management and public finances at the College of Business Administration in Kuwait University, explained, “From the 1960s to the present day, there have been demands for economic reform, specifically diversification of income sources. Until now, no real reform has occurred and we have not found seriousness in diversifying income sources.

The Kuwaiti people are today paying the price for the delay in economic reforms. We are still almost completely dependent on oil and our fate has become linked to the strength of supply and demand in the market that determines the price of a barrel of oil. The fiscal deficit in the budget of Kuwait started from the 2014/2015 fiscal year when there was a sharp drop in the price of a barrel of oil. In the years that followed, Kuwait recorded a real deficit in the final account.

Dr. Al-Gharabally said all countries of the world are suffering today from an economic crisis, including Norway which is exemplified by good financial management, as well as the Gulf states because of their dependence on oil. He stressed that the economic crisis is aggravating and becoming complicated due to the COVID-19 pandemic, which is painfully related to health and psychological aspects, adding that the crisis of the low price of a barrel of oil is economically painful. Dr. Al-Gharabally went on to say, ‘With regard to the monetary policy, the Central Bank of Kuwait played its full role, and the interest today reached 1.5 percent, which is the lowest interest in the history of Kuwait.

The Central Bank took several decisions, including reducing restrictions on banks to facilitate their use of liquidity in order to increase liquidity in the market, which is the desired goal in terms of motivation. Regarding the financial policy, there is a mistake in dealing with recommendations that came out, but until today, they were not fully implemented.’

Dr. Al-Gharabally stressed that countries, when in crises, work to protect vital sectors and focus on sectors with added value, but Kuwait does not have clear definitions of vital sectors and value- added sectors. He indicated that there is an absence of definitions for small and medium enterprises in Kuwait, and there is no database for those projects, adding, ‘We have a crisis in terms of transparency and scarcity of information.’

In an intervention by the economist Abdulaziz Al-Hudaib, he insisted that the economic solutions proposed today are ‘needles’, indicating that the value of retained earnings ranges between KD 8 billion and KD 9 billion and is with the Kuwait Petroleum Corporation, while it is difficult to obtain it during this year.

He indicated that the country cannot rely on this solution to provide the necessary liquidity to finance the 2020/2021 budget. Al-Hudaib stated that there is no problem in public debt, but the problem is how to manage this debt, stressing, “We cannot withdraw from the fund for future generations except by law, but this is considered a temporary and undesirable solution”.

In his intervention, MP Osama Al- Shaheen explained that the government deals with commercial, economic and financial businesses with a very careful “drip irrigation” system. The economic and financial sector is damaged and pays monthly expenses through which it has incurred a lot. He added that the government’s economic solution came late, and governmental procedures are slow and promises more than what is implemented on the ground.

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