By B Izzak
KUWAIT: Lawmakers, spearheaded by National Assembly Speaker Marzouq Al-Ghanem, vowed yesterday that a government-sponsored draft law to withdraw KD 5 billion annually from the country’s sovereign wealth fund will not pass at the Assembly, describing it as “catastrophic”. The government has said the bill aims to finance cash-strapped state coffers, responsible for public expenditure, which has been drained due to a sharp fall in oil revenues.
The government has been facing acute shortfalls in the state budget, which in the current and coming fiscal years are projected to hit KD 26 billion. Oil income accounts for more than 85 percent of public revenues.
Kuwait has two reserve funds – the first is the general reserve fund which provides money for public spending and gets its funds from public revenues, while the second is the future generations fund, or the sovereign wealth fund, which gets its assets by a transfer of 10 percent of revenues every year. But this step has been suspended due to low oil prices.
Ghanem said the draft law is “extremely dangerous”, adding he believes it will not be approved by the Assembly. He said the bill aims at using funds that “we do not own” because it is the property of future generations. Ghanem said the bill is not the best option from an economic viewpoint because the cost of selling assets is higher than borrowing.
He said that the cost of selling investments is estimated at KD 300 million a year, while the cost of borrowing is just KD 75 million if calculated for the KD 5 billion. The speaker said he believes the fundamental solution to this chronic problem is for the government to announce wide-ranging reforms and be transparent with the people.
Opposition MP Bader Al-Dahoum strongly lashed out at the government, saying that it is the same government which failed to manage the country’s financial resources when oil prices were $120 a barrel and squandered public funds by granting unnecessary projects to some influential corrupt people. He said if the government continues with its policies, the country is at risk of going bankrupt, adding that MPs will not allow the bill to pass. He called on economists to prepare studies for better alternatives that can save the future generations fund.
Opposition MP Mohammad Al-Mutair said he will not approve withdrawals from the future generations fund unless it is in the form of a loan, provided the government submits a plan on how to repay it. MP Hesham Al-Saleh said the withdrawal of KD 5 billion from the sovereign wealth fund is “catastrophic” and extremely dangerous.