The Kuwaiti government has been facing economic unrest due to heavy debt and lack of trust between government and lawmakers.
Rabat – The government of Kuwait will be unable to pay salaries after October as the Gulf country’s economy continues to decline.
The outlet quoted the country’s Finance Minister, Barak Al Sheetan, warning parliament that political issues “delayed efforts to return to international bond markets.”
The official warned against depleted liquidity and said the Kuwait’s government is now drawing from its General Reserve Fund.
Al Sheetan said Kuwait’s struggling economy will worsen if oil prices do not improve or if the Gulf country finds itself unable to take loans from local and international markets.
Bloomberg showed a chart of the Kuwaiti net government financial assets, stipulating that the International Monetary Fund (IMF) data indicates an expected decline in the country’s assets in the coming years.
The crisis comes amid accusations that government officials face from lawmakers of “mismanaging public money.”
Lawmakers are, therefore, blocking provisions that would allow Kuwait’s government to take loans from abroad.
On Wednesday, the Kuwaiti parliament passed a law to restrict transfers of state revenue to its sovereign wealth funds.
The decision aims to inject over $12 billion “in much needed liquidity to the treasury,” Reuters said.
The parliament also decided to return a debt law to a parliamentary committee for study for two more weeks. It would let the government borrow $65.4 billion over 20 years.
Under the new law passed by the parliament, the government will only allow transfers to the fund “when the year’s budget is in surplus.”
Currently, Kuwait automatically transfers 10% of the country’s revenue annually to its Future Generations Fund, meant as a buffer should Kuwait deplete its oil reserves.
The Gulf country, which is a major oil exporting economy, has been facing economic unrest due to the COVID-19 crisis. The pandemic’s recupressions and harsh low crude prices directly affected Kuwait’s economy.
Kuwait is running a $46 billion deficit for this fiscal year, which started April 1.