International Monetary Fund's Chief Christine Lagarde said in remarks published on Sunday that Kuwait is privileged with enormous financial reserves, which allow the country to conduct gradual economic reforms, especially by directing surpluses to productive spending. She added in an interview with daily newspaper, "Al-Qabas," that there is a dire need for the government to take serious steps towards economic reforms, especially following the decline in oil prices, calling on the country's competent authorities to take the right measures in increasing the non-oil revenues.
Lagarde also called on the government to impose taxes on commercial profits, as extra profits are expected, despite any low rates of taxes price, as "tax payers benefit from the government offered services, and thus should contribute to covering costs." Reforming the public financial policy is the key tool for adjusting with the oil prices decline, Lagarde said, stressing on importance of setting strategies to adjust the general budget situation.
"The citizens would understand the reasons behind such financial measures in the light of oil prices decline," she affirmed. Kuwait budget registered a deficit which is less than a number of other Gulf Cooperation Council (GCC) countries, and it is still fulfilling financial surpluses despite the falling oil prices, and has large financial reserves, she said.
Such reserves should immediately be invested in expanding the non-oil revenues, and to reorganize the national economic structure, she added. She called on the GCC countries to increase the diversity of economic activities, as by 2020, a total of two million citizens will enter the Gulf labor market, however regarding the "general financial restrictions that limit the employment opportunities in the public sector, the private sector should contribute in facing such challenge". Lagarde added that the diversity of economic activities in the Gulf region requires reorganizing the available incentives for companies and national workforce, indicating that investment and good production in the local market entails less risk and more profits for companies compared to exports.
The continuation of jobs availability in the public sector leads to reducing any incentives to getting employed in private sector or stablishing personal projects in the business sector, she said.
Kuwait needs to take extra measures to improve the business atmosphere and boost the competence spirit, besides redirecting the general spending and following up with the implementation of labor market reforms, she mentioned.
Such reforms will tackle the fuel prices, salaries, in addition to warranted measures such as increasing taxes on companies, imposing added value taxes, besides fees on lands and real estate. Lagarde will visit Kuwait this week to attend the World Islamic Financing Conference, which is organized by the IMF in cooperation with Kuwait Central Bank, due next Wednesday.