A proposed law seeking financing loans for state-owned and state-affiliated companies to fund their economic projects has been met with rejection from key government entities. The proposal, put forth by several representatives, aimed to secure loans from the General Authority for Investment and the General Organization for Social Insurance. However, this initiative faced opposition from the Central Bank of Kuwait, the General Authority for Investment, and the General Organization for Social Insurance, with concerns raised about its potential impact, reported Al-Jarida Daily.
The Central Bank of Kuwait expressed apprehension that implementing such a proposal would negatively affect the local banking sector, the state’s monetary policy, and interest rates. It suggested that this could lead to the emergence of a government financing sector running in parallel with the banking industry, thereby introducing competition that might influence the banks’ role in the local economy. Furthermore, these loans would not adhere to the established interest rate structure.
The General Authority for Investment clarified that the provision of these loans falls outside its jurisdiction, and the proposal did not specify the loan sizes. It suggested seeking a legal opinion from the Fatwa and Legislation Department. The General Organization for Social Insurance also disapproved of the proposal, emphasizing that providing loans is not part of its strategic plan for investing funds. The organization’s primary focus is achieving maximum returns with the least amount of risk to fulfill its obligations and disburse beneficiaries’ rights.
The proposed law was intended to address the challenges faced by state-owned entities seeking financing for their economic development projects. These companies often need to secure loans from financial institutions, exposing them to various financial risks due to unfavorable lending terms.