DUBAI/KUWAIT: Bahrain yesterday announced a hike of more than 50 percent in petrol prices following its cut in subsidies for energy products as oil producing countries struggle with nosediving crude prices. The government said the price of regular petrol will increase today from 80 fils (20 cents) per litre to 125 fils (33 cents), an increase of 56.3 percent. The more expensive super petrol will increase by 60 percent, from 100 fils (27 cents) to 160 fils (42 cents) per litre, it said after a cabinet meeting. Earlier this month, Bahrain cut government subsidies for diesel and kerosene following similar moves by its Gulf neighbors.
Saudi Arabia in December raised petrol prices by 50 percent as part of subsidy cuts for petroleum products, power and water, after the country posted a record $98 billion budget deficit for 2015. The United Arab Emirates has liberalized fuel prices, while Kuwait lifted subsidies on diesel and kerosene from the start of 2015. Arab states of the Gulf, heavily reliant on oil income, have been hit hard by the sharp decline in crude prices.
Kuwaiti Finance Minister Anas Al-Saleh said the government plans to take proposals to cut subsidies on commodities and public services, as suggested by an international consultant, to the National Assembly. The aim is to rationalize the use of these services and to ensure that subsidies reach those who deserve it, the minister said. National Assembly speaker Marzouq Al-Ghanem meanwhile said that he was assured by the prime minister that the government will not take any unilateral decision on subsidies and that it will share it with the Assembly.
Ghanem however insisted that the Assembly is prepared to adopt measures that do not harm low-income people and pave the way for “real economic reforms” to deal with the distortions in the national economy. He underscored the need to “tackle the large distortions in the state budget”, adding that “it is not possible to lead the state to bankruptcy”.
Saleh said that the government will explain to the Assembly the financial and economic status of the nation and the urgent financial challenges the country is facing. The government will brief the Assembly on the proposed measures to face the challenges to ensure a sustainable capability for the state to continue to provide a dignified living for citizens, the minister said.
Saleh did not say what measures the government plans to propose to face the impact of the sharp fall in oil prices on the Kuwaiti economy, but he was referring to a study made by Ernst &Young that proposed massive cuts in subsidies on a wide range of services and commodities, especially raising the price of petrol, electricity and water.
A large number of MPs have openly refused any government austerity measures that could impact citizens and urged the government to find other alternatives to cut spending and deal with the budget deficit. Ghanem said that the Assembly may hold a special meeting or debate to discuss the issue, adding that he met Prime Minister HH Sheikh Jaber Al-Mubarak Al-Sabah who promised that the government will not take any unilateral action on this issue. The speaker said the country is facing difficult challenges but “we are capable of overcoming them without hurting low-income people”.
At the start of last year, the government lifted subsidies for diesel and kerosene. Under a law, the government cannot increase charges on public services without amending a two-decade old law that bans the government from doing so without prior approval of the Assembly. But it is in the hands of the government to raise the prices of fuel without prior consent of MPs.
Kuwait’s moves come after almost all GCC peers have increased or plan to raise the prices of fuel and other heavily-subsidized commodities and services. With the latest decisions, Kuwait collects the cheapest rates on electricity, water and fuel in the GCC. Based on an oil price of $45 a barrel, the total cost of subsidies on fuel and electricity is about KD 2.2 billion in the budget of the current fiscal year 2015/2016, which ends March 31.
A similar amount of subsidies is spent on social allowances and aid to citizens, which includes KD 625 million for social aid, KD 495 million for supporting national labor employment in the private sector, marriage and housing allowances and others.
By B Izzak and agencies