Interpreting Middle East Economic News and Analyzing Market Trends

Category: Kuwait

Kuwait approves debt relief for a select few

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The parliamentary debate, which has been going on for months, finally came to an end yesterday with a vote of 50 in favor and 4 against.  The bill calls for the government to buy personal loans of some citizens, write-off interest and reschedule payments.  The total expected cost is $2.6 billion.

 

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Egypt & Jordan: Taking away subsidies is proving more challenging than expected

Governments in the Middle East, regardless whether they have oil wealth or not, are being forced to rethink the subsidies they give to their citizens either to shore up their finances or to move along a more sustainable path.  We’ve discussed issues with subsidies in previous posts, here, here, here and here.  

 

Government’s in the region put themselves in the predicament they are in decades ago as a way to keep their citizens happy and give them a sense that their governments are doing something for them.  However, decades later and millions of people later, these governments are facing a financial crisis and no longer have a choice but to reduce subsidies.  In doing so, they are putting their survivability at risk as is the case with Egypt and Jordan (see below).

 

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Arab governments to inject billions into regional development banks

Arab governments realizing the need to step up investment efforts in the Middle East after the Arab Spring are pledging to inject new capital into the five main development banks in the region.  They are;

 

1.  Arab Fund for Economic and Social Development

2.  Arab Monetary Fund

3.  Arab Bank for Economic Development in Africa

4.  Arab Authority for Agricultural Investments and Development

5.  Arab Investment and Export Credit Guarantee Corporation

 

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Egypt close to default and Bahrain one step away from junk bond status

Cyprus has been dominating the financial news over the past two weeks.  The crisis seemed to come out of nowhere and rattle financial markets.  There are many questions that come up with events like these.  One key question is, did this crisis really come out of nowhere?  Another key question is, how can we spot potential crisis in the future?  What about the Middle East and the GCC in particular, are there any trouble spots?

 

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Kuwait to cut subsidies, introduce VAT and income tax in the coming years

Kuwait’s Central Bank is forecasting a slowdown in 2013 as it expects a contraction in the oil sector, according to the Kuwait Times.  The Central Bank trimmed its economic growth to 1.9% this year, compared to 6.3% in 2012 and 8.2% in 2011.  The country has had trouble diversifying the economy away from its dependence on the oil sector so any contraction in this sector will have a significant affect on the overall economy.

 

The country has come to realize, however, that it must not only diversify its sources of revenue, it must also cut subsidies and introduce a consumption tax in the near future.  Gulf countries have a generous welfare system, which includes subsidized food, fuel, housing, water and electricity along with free health and education.  None of the countries in the Gulf have been able to introduce a tax system yet, much less reduce the population’s reliance on subsidies.  This is a very sensitive subject, which we have covered in previous post, here and here.

 

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