Drawing on the old WWII adage, “When you hear the roar of cannons, start building”, Kuwait’s unique geographical location positions it to play a major economic role in the region. However, to realize this potential, essential changes are required, foremost among them easing the harsh operating conditions currently imposed on local companies and institutions. It is extremely difficult for businesses to operate under such intense pressure, with the constant threat of closure, often triggered by minor administrative errors or even by failing to repay interest, not just the loan principal, to banks. This challenging environment stems from strict directives of the Central Bank of Kuwait that compel commercial banks to aggressively pursue debt collection without adequately considering the negative impact on the local economy. Such rigidity is applied even to institutions that hold collateral valued at three times the amount of their loans.
While such strict measures may be understandable during periods of active trade and normal economic conditions, they are ill-suited to the present situation. Given the current international and regional context, including wars, political instability in neighboring countries, and anticipated major global transformations, it is vital to support productive sectors. Allowing these sectors to operate smoothly is essential for them to contribute effectively to increasing national output. At the onset of the COVID-19 pandemic, the government provided significant support to manufacturers, service providers, and retailers.
This stands in sharp contrast to the decisive measures adopted by other Gulf countries. For example, the Saudi government implemented major steps, including waiving consumer loans for citizens and freezing the collection of fees from companies, institutions, and factories for a five-year period. In addition, the government actively promoted individual enterprise by directing commercial banks to reschedule debts, particularly for struggling businesses and projects, and to reduce loan interest rates. By facilitating lending, the aim was to prevent a slowdown in the local economy, based on the principle that time can resolve all problems if there is a clear vision for maintaining long-term strength.
This approach recognized the need to develop the economy in line with current realities and ensure steady progress. Ultimately, the prevailing philosophy in some Gulf countries was that collateral exceeding the value of the loan provides banks with strength and flexibility in their credit policies. In stark contrast, excessive rigidity in Kuwait’s policies has often led to business bankruptcies. At the same time, some banks, seeking to retain their existing clients, maintained a limited degree of operational flexibility. They reinforced their positions by securing collateral from companies and institutions that exceeded the value of the loans granted. While banks sought to achieve their objectives with minimal negative impact, this flexibility was severely limited by the Central Bank of Kuwait’s explicit directives mandating strict lending practices. The adverse consequences of this rigidity became clear when the Central Bank of Kuwait later suspended lending and imposed even stricter policies. As a result, the economy suffered, with consumers feeling less financially secure and unable to spend as freely as before, leading them to adopt a more cautious approach to spending. Ultimately, easing restrictions on the public helps cushion the economy against shocks.
In contrast, when a government tightens procedures excessively, it often deepens and prolongs the crisis, making the government itself the greatest loser, both economically and financially. Your Highness the Prime Minister, Your Excellency the Minister of Finance, the opportunity to implement numerous solutions is immediately available, particularly with the Governor of the Central Bank of Kuwait involved, should the Cabinet choose to seize it for the future. The clamor of war in the region is growing louder, and those who fail to plan and build today will find themselves economically disadvantaged once regional and international stability is restored. Therefore, we pose a final question – Do we want to eat the grapes or fight the guard?
