An economic report highlighted that Kuwait’s recent reforms, including taxing multinational companies, allowing foreign real estate ownership, and fast-tracking development projects, have strong implementation potential due to government authority. However, it noted that the country has yet to adopt a transformative economic approach to fully overcome past delays.
The report published online, noted that despite recent reforms, Kuwait has not achieved significant growth in non-oil revenues compared to Saudi Arabia. Over the past 15 years, non-oil revenues have increased by just 15%, now accounting for about one-third of government income.
Furthermore, the report highlighted that, in response, the government has recently introduced several financial and economic decrees and bills, offering a glimmer of hope for Kuwait. It emphasized the need to boost financial liquidity, reduce service subsidies, and cut certain public sector allowances to unlock the country’s economic potential.
Industrial Activity
The Arabian Gulf Business Insight report emphasized the need for Kuwait to accelerate industrial activity, foster financial sector innovation, and facilitate foreign investment. However, it noted that these measures will take years or even decades to materialize. The report expressed hope that progress on these long-awaited reforms will continue, given their significant economic and financial benefits for Kuwait’s future.
The report noted that with public sector wages about 40% higher than private sector salaries, according to the IMF, transitioning economic activity and skilled workers to the private sector will be challenging in Kuwait. It highlighted the long-standing preference among citizens for government jobs.
Moreover, the report highlighted that while government salaries, subsidies, and grants make up over two-thirds of Kuwait’s budget, the country’s main challenge lies in governance and economic management rather than financial constraints. However, it noted that recent financial measures continue to reflect Kuwait’s weak economic performance over past decades.
Strong Reserves
The Arabian Gulf Business Insight report estimated Kuwait’s foreign exchange reserves at around $630 billion, and highlighted that the Kuwait Investment Authority manages one of the world’s largest sovereign wealth funds, with assets exceeding $1 trillion.
The report cited the IMF’s December statement, which confirmed Kuwait’s steady financial surplus, factoring in investment income and oil company profit transfers. However, the report noted that the government needs cash liquidity to cover a projected $20 billion deficit in the next fiscal year’s budget.
Source: Al Qabas
