By B Izzak
KUWAIT: The government yesterday sent a draft law to the National Assembly seeking to withdraw KD 5 billion annually from the future generations fund to meet an ever-rising budget deficit due to low oil prices. The draft law stipulates to allow the government to withdraw a maximum of KD 5 billion from the future generations fund in favor of the general reserve fund, which provides for government expenditures.
Under the existing law, the government is forbidden to make any withdrawals from the future generations fund or even use its returns, which must be added to the fund, whose assets are estimated at around $600 billion. The government said it needs the funds to finance its cash-strapped general reserve fund, which gets money from state revenues, which have been badly affected since 2014 because of the sharp fall in oil prices, which make up more than 85 percent of public revenues.
As a result, Kuwait has posted huge budget deficits since then. In the current and next fiscal years, the government has projected a deficit of KD 26 billion. The drop in revenues was accompanied by a continuous rise in public spending, resulting in draining the general reserve fund.
In past years, Kuwait was transferring 10 percent of total revenues into the future generations fund, but last year, the Assembly passed a law allowing the government to stop making the transfer because of weak revenues. The government tried to pass a law in the Assembly to secure fresh funding through external and internal loans, but MPs refused to pass the legislation.
MPs yesterday called the government’s move to withdraw money from the future generations fund as “dangerous”, saying it reflects its failure to manage the country’s finances. They vowed not to pass the law. MP Muhalhal Al-Mudhaf said after the government drained the general reserve fund, it has turned to the future generations fund by proposing a law “which we will not allow to pass”.
MP Thamer Al-Suwait said “an incompetent government comes up with bad solutions”. MP Fares Al-Otaibi described the bill as “dangerous”, adding that failure to find viable solutions for the budget deficit threatens the future of Kuwait’s finances.
Meanwhile, the legal and legislative committee yesterday approved a draft law calling on the government to purchase the personal loans of Kuwaiti citizens and exempt them from interest. It referred the bill to the financial and economic affairs committee for an in-depth study of the law. The committee also passed a law calling to compensate small and medium businesses affected by the coronavirus closures and referred it to the financial panel.