Although most Gulf states are working to diversify their economies away from oil and gas, energy sales still represent more than 90 percent of Kuwait’s revenues.
For at least a decade, “Kuwait has been paralyzed by a political tug of war between leaders pushing to open the economy and those who prefer to maintain a tightly controlled oil rentier state,” the magazine reported.Global Finance“The American newspaper, which indicated at the same time, that the “stalemate” in Kuwait “appears to have broken.”
Last month, Kuwait’s new Prime Minister, Sheikh Mohammed Sabah Al-Salem, presented his government’s action plan to Parliament, including a package of financial and economic reforms.
Muhammad Al-Salem said, “It is impossible to sustain the welfare state in light of continued reliance on depleted natural wealth,” adding: “Our goal is to transform depleted wealth into renewable and vital wealth.”
Measures still under discussion include allowing Kuwait to borrow in international markets, allowing commercial banks to enter the real estate loan market, ending the monopoly that the Kuwait Credit Bank has enjoyed for a long time, and expanding the tax base by imposing new taxes on local companies.
However, any threat to the somewhat luxurious lifestyle of Kuwaitis is bound to spark controversy, especially within Parliament, which has broad oversight powers.
The country’s economy is exposed to oil shocks, given that Kuwait relies on black gold as its primary source of income.
When oil prices were high in 2022, GDP recorded an increase of 8.9 percent, according to International Monetary Fund data. Last year, amid OPEC+ production cuts, the percentage barely reached 0.1 percent.
But Kuwait’s oil and gas reserves have historically served as a strong safety net, and it has plenty of money to weather the fluctuations of energy markets.
“The banking sector is the cornerstone of the economy,” said Ali Khalil, CEO of Kuwait Financial Center (Markaz), an asset management and investment banking firm.
He continued: “This financial strength not only protects banks from market fluctuations, but also qualifies them to benefit from growth opportunities.”
The Gulf state also has a “tremendous power” represented by the Kuwait General Investment Authority, which is one of the largest sovereign funds in the world, with assets amounting to $800 billion, estimated at 470 percent of the total gross domestic product.
Based on “strong prudential supervision by the Central Bank,” the International Monetary Fund indicates, in its latest Staff Concluding Statement of the 2024 IMF Article IV Mission, that “the impact of the global banking sector turmoil on Kuwaiti banks was weak.” .
Salah Al-Fulaij, CEO of the National Bank of Kuwait, the country’s oldest bank with assets of more than $120 billion, said: “Kuwait’s financial institutions stand out not only as some of the largest and most resilient in the region, but also as among the most profitable.”
He added that the long-awaited new debt law, which allows Kuwait to access international debt markets, “would provide a structured approach to public financial management and ensure prudent financial operations, issues that rating agencies have regularly highlighted as a weakness in their assessment of Kuwait’s sovereign ratings.” .
The restructuring of the financial market by the new government is consistent with efforts dating back several years to attract foreign direct investment, by transforming Kuwait into a commercial center linking Europe, Asia and Africa, similar to the neighboring Emirati city of Dubai.
In this regard, Talal Al-Othman, Vice President of Asset Management at Al Ahli Bank of Kuwait Capital, said: “As Kuwait continues to develop and diversify its economy, investors are attracted to the opportunities provided by this dynamic and promising market.”
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