The parliament gave its approval to a law setting conditions on the annual transfer of state funds to the Future Generations Fund (FGF), enabling the Ministry of Finance to infuse a little over KD2 billion into the economy.
The National Assembly in its session on 19 August passed a law that set the conditions for transfer of funds from the General Reserve Fund (GRF) to the Future Generation Funds. The new law would allow funds to be transferred to the FGF only if the budget registers a surplus in that year. The previous law had mandated that 10 percent of the State’s income would be automatically transferred to the FGF each year. The FGF is the main asset of Kuwait’s sovereign wealth fund, which is the world’s first and oldest sovereign wealth fund and is ranked among the top-five global wealth funds.
The Future Generation Fund along with the General Reserve Fund, which is the government’s main source of budget financing, are managed by Kuwaiti Investment Authority (KIA). Parliamentary approval that set the stage for injection of money into the GRF will provide the government with a breather as it seeks alternative ways to enhance liquidity. Analysts say the infusion of KD2 billion will not be sufficient to cover government spending, such as public sector salaries, for more than a few months under the current low oil price scenario.
Kuwait’s economy has been adversely impacted by the drop in oil prices and the COVID-19 pandemic, which saw businesses suspend activities and people forced to stay indoors under lockdown. In addition, government expenditure far exceeds revenue. Last week, the National Assembly dismissed a Public Debt law that would have allowed Kuwait to borrow KD20 billion over the next 30 years. The government has been tapping into the General Reserve Fund to obtain liquidity amidst widening annual deficits.