Kuwait needs liquidity estimated at two billion dinars from now until June 2027 in order to repay the international and local bonds it issued to finance the budget deficit, after the government paid one billion dinars on March 20, out of 3 billion dinars total debt resulting from the issuance of bonds.
In the face of the lack of liquidity in the General Reserve Fund, the government will have to rush the National Assembly once again to issue the Public Debt Law to finance the repayment of the amounts due, reports a local Arabic daily.
Minister of Finance and Minister of State for Economic Affairs and Investment Abdulwahab Al-Rasheed said the total volume of international bonds issued by the government was 2.4 billion dinars; while the volume of local bonds amounted was 600 million dinars.
Al-Rasheed explained in his response to MP Abdullah Al-Tariji’s question, a copy of which was obtained by the daily, “issuing bonds requires legislation from the National Assembly in accordance with Article 136 of the Constitution, and the bonds that were issued were all done in accordance with Law No. 50 of 1987 and its amendments issued in the matter of authorizing the government to contract general loan.
He stated that the sources of financing for the repayment of bonds will be either through the General Reserve Fund in the event of the availability of the necessary liquidity for repayment, or the issuance of public debt (re-issue) to finance the repayment of the amounts due, thus providing the necessary general liquidity.
Al-Rasheed stressed that it was necessary to issue these bonds to cover the general budget deficit, due to the financial conditions that faced the country in the year of issuance (2016-2017), which was represented by the decrease in the liquidity balance and the vulnerability of the general budget. That time was the appropriate method to cover the budget deficit, especially the availability of appropriate levels of liquidity at the local banking system, the low cost of external borrowing, in addition to the soundness of the creditworthiness of the State of Kuwait at that time.
He added, “The bond funds in that period were directed to the General Reserve Fund to contribute to financing part of the public budget deficit.” Regarding the proposed plans to address the public budget imbalances, Al-Rasheed said that these plans are included in the government’s work program for the sixteenth legislative term (2021 / 2022 – 2024 / 2025), which is based on four main pillars.
The main pillars of the first axis of the government’s work program entitled “Implementation of the Economic and Financial Reform Program” are as follows:
1 – Improving the business environment.
2 – Supporting the growth of the private sector.
3 – Development of the labor market.
4 – Sustainability of public finances.
As for the second axis related to restructuring the public sector, it is concerned with developing the administrative structure of the government apparatus, enhancing integrity and combating corruption.
The third axis bears the title of human capital development, and aims to reform the education system, develop health care, and empower youth, women and persons with disabilities.
The fourth axis focuses on improving infrastructure and employing renewable energy, by improving the efficiency of infrastructure management, and developing a sustainable energy system to meet the challenge of global energy transformations.