The BI-ME eNewsletter
3rd September, 2010, 07:41
Kuwait grapples with recovery plan
Source: BI-ME and Reuters , Author: BI-ME staff
Posted: Mon February 9, 2009 12:00 am
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KUWAIT. Kuwait’s central bank has urged the Gulf state to use fiscal policy to stimulate growth and tackle a decline in asset and real estate prices amid the global crisis, its governor said in remarks published yesterday.
The comments came hours before Sheikh Salem Abdul-Aziz al-Sabah gave a news conference to announce that the government had agreed on a package of rescue measures to soften the impact of a global credit crunch on the OPEC country.
The country plans to cut spending by some KWD 7 billion (US$23.77 billion) to KWD 12.05 billion in the new fiscal year based on preliminary figures, the head of parliament’s budget committee said last week.
Sheikh Salem also reiterated Kuwait would not disclose the composition of a currency basket it introduced after dropping a dollar peg in May 2007.
“Pegging the Dinar to [several] currencies instead of one provides a bigger flexibility for the exchange rate of the Kuwaiti Dinar to soak up parts of sharp fluctuations in the US Dollar exchange rate to other major currencies,” he said.
Kuwait has let the Dinar depreciate below its old dollar peg as analysts said it plans to offset a rise in the US Dollar against the Euro and to help boost oil revenues paid in dollar to stimulate the economy.
The move has prompted some analysts to speculate Kuwait may return to the dollar peg at some point to prepare for monetary union for 2010 but there is no imminent move likely.
The comments came hours before Sheikh Salem Abdul-Aziz al-Sabah gave a news conference to announce that the government had agreed on a package of rescue measures to soften the impact of a global credit crunch on the OPEC country.
The country plans to cut spending by some KWD 7 billion (US$23.77 billion) to KWD 12.05 billion in the new fiscal year based on preliminary figures, the head of parliament’s budget committee said last week.
Sheikh Salem also reiterated Kuwait would not disclose the composition of a currency basket it introduced after dropping a dollar peg in May 2007.
“Pegging the Dinar to [several] currencies instead of one provides a bigger flexibility for the exchange rate of the Kuwaiti Dinar to soak up parts of sharp fluctuations in the US Dollar exchange rate to other major currencies,” he said.
Kuwait has let the Dinar depreciate below its old dollar peg as analysts said it plans to offset a rise in the US Dollar against the Euro and to help boost oil revenues paid in dollar to stimulate the economy.
The move has prompted some analysts to speculate Kuwait may return to the dollar peg at some point to prepare for monetary union for 2010 but there is no imminent move likely.
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