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Kuwait Premier Assails Welfare State in Plan to Review Subsidies

Oct. 28 (Bloomberg) -- Kuwait’s government, which under parliamentary pressure agreed this year to pay $2.6 billion to write off a portion of personal loans, is urging citizens to reduce their reliance on an “unsustainable” welfare state.

Kuwait, which like other neighboring oil-rich nations has used the windfall from energy exports to provide free fuel, education and health care to citizens, plans to review its policies on subsidies and public services, according to a four-year development plan. The government said the plan, sent to parliament yesterday, won’t affect people with low income.

“Everyone must understand that the existing welfare state that Kuwaitis are used to cannot continue,” Prime Minister Sheikh Jaber Al-Mubarak Al-Sabah said, according to the text of the development plan. “It’s necessary that Kuwaiti society shifts from a consumer of the nation’s resources to a productive people.”

The International Monetary Fund has repeatedly urged members of the six-nation Gulf Cooperation Council, which includes Kuwait, to reduce energy subsidies, as rising public spending pushes some governments toward posting budget deficits. The Middle East and North Africa accounted for about 50 percent of global energy subsidies in 2011, according to an IMF study released this year.

Kuwait, which recorded surpluses for the past 14 fiscal years, can expect a budget deficit in 2021, depending on oil prices and spending growth, according to the government’s program. Kuwait is the third-biggest producer among members of the Organization of Petroleum Exporting Countries.

The plan will be reviewed by parliament, which starts a new term tomorrow after a summer recess.

To contact the reporter on this story: Fiona MacDonald in Kuwait at fmacdonald4@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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