MoF awaits govt nod on changes to law on ‘future generation fund’

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Move to recover transferred KD 2.05 bln

KUWAIT CITY, Aug 23: Ministry of Finance is waiting for government’s approval of the new amendment to law governing the future generations fund, which is to be published in the Official Gazette, in order to recover KD 2.05 billion transferred recently to the fund, provided that the sum will be pumped into the public reserve fund, reports Al-Qabas daily.

The daily quoting reliable sources said “once recovered, the aforementioned sum would enhance the liquidity of the public reserve, which is charged with covering the public budget deficit”. At the same time, it’ll give government some time to find a solution to the problem of liquidity scarcity in the fund.

The same sources explained that two billion dinars was transferred by government against the 10 percent total budget revenues that were established according to the old law, as they were deducted from the revenues of fiscal year 2018-2019

The sources stated that government will work during the coming period to introduce amendments requested by members of the Parliament regarding Public Debt Law in an attempt to pass it with minimal losses, and if it does not reach an agreement to approve the law, it will have no option than to wait until the end of the current parliament’s term, and its approval in accordance with decree of necessity.

The sources added: Despite the “temporary” breakthrough to be achieved as a result of pumping two billions into the public fund. This comes after KD 2.3 billion was pumped in exchange for shares swapping between the public reserves and the future generation fund, which will only cover budget expenses such as salaries and others for a few months in light of the continuing decline of oil prices and the absence of serious economic and financial reforms.

The sources emphasized that there is no solution to the liquidity crisis in the public reserve fund- except through the approval of Public Debt Law, which would give government sufficient time to rearrange its papers and take decisions to prolong the budget’s lifeline, whether by increasing non-oil revenues or reducing expenditures, rationalizing spending and curbing the various aspects of waste in the governmental institutions and bodies.

The amendment stipulates deducting a specified percentage of revenues in the event of an actual surplus in the final account result, based on the proposal of the Minister of Finance and approval of the cabinet.

By adopting this law, Kuwait formally deposited the saving time that has lasted since 1976 (except for the year of the invasion), which the country was keen on even in the years the budget was in deficit. It is noteworthy that about KD 36 billion have been transferred to the Future Generations Fund during the last ten years. The sources said “curbing the deduction would reduce pressure on the public reserve, which has worsened greatly in recent times, in the absence of Public Debt Law.

The sources said the public reserve fund is currently paying the price of the slowdown in approving the new public debt law, as it transferred in recent years (specifically from the beginning of the budget deficit in the 2014/2015 fiscal year until the end of the fiscal year 2019/2020) an estimated KD 13.8 billion to the future generation fund, while the budget recorded losses in those years amounting to about KD 30 billion.

“If the deduction had been stopped since the first years of the deficit, the fund would have had sufficient liquidity to spend on the budget deficit over the next two years, instead of the current situation, in which government may face difficulty in paying salaries in the coming period,” noted sources.

The law to stop deduction should have been passed in the first year of fiscal deficit 2014/2015 when the fund transferred KD 6.2 billion to the future generations fund, despite the budget’s achievement of KD 2.7 billion at that time, sources stated.

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