Kuwait Lawmakers Give Initial Agreement to Bailout DealFiona MacDonald
Kuwait’s parliament gave initial approval to a bill requiring the government to purchase citizens’ loans taken before March 30, 2008 and write off all the interest before rescheduling debtors’ payments in installments.
The draft law was approved in a first round of voting by 33 lawmakers out of 56 members of parliament who were present. The government, which has always been opposed to bailing out consumers, abstained. State Minister for Cabinet Affairs Sheikh Mohammed Abdullah Al-Sabah said the government rejects the law in its current form, “but as a sign of cooperation we will abstain and wait for fundamental amendments.”
Details of the bill are still unclear and neither the government nor lawmakers knew the cost. “It could be 1 billion dinars ($3.5 billion) or 4 billion dinars,” Finance Minister Mustafa Al-Shimali told parliament, saying the government needed more time to review it. Legislators urged the house to pass the bill in the first round before making a number of amendments prior to a final vote.
Previous attempts at passing similar laws have failed amid opposition by the government, which always said Kuwaitis in trouble with loan payments already have access to a special fund set up in 2007. Central Bank Governor Mohammed Al-Hashel, who is opposed to scrapping the interest on loans, said in October that about 26,000 Kuwaitis had registered with that fund and received interest-free loans of 420 million dinars.
A number of lawmakers today also called for writing off the interest on loans taken after March 2008. “We should lessen the suffering of all the people,” Ali Al-Omair told parliament. Banks who took money “illegally” from Kuwaiti citizens “should return it,” Nawaf Al-Fuzaie said. Lawmakers, who claimed banks inflated interest payments for borrowers between 2002 and 2008, said lenders would lose more than 300 million dinars as a result of this bill.
“The central bank’s objection to the principle remains the only rational official stance and therefore should be appreciated and supported at a time when reason does not count in the decisions of the public administration,” Kuwait-based Al-Shall Economic Consultants said.
The International Monetary Fund has warned Kuwait will exhaust oil revenue by 2017 if the government’s current spending policy continues.