The emir of Kuwait urged the cabinet and parliament to cut state spending in response to slumping oil prices, warning that any delay would increase the damage to the government’s finances.
The remarks by Sheikh Sabah al-Ahmed al-Sabah, in a speech to parliament, appeared to be an effort to prepare the ground for politically difficult economy measures such as cuts in energy and food price subsidies, which could occur next year, Reuters reported.
“Oil prices have caused state income to drop 60%, but public spending has not been cut, causing a state budget deficit which is a burden on our development aspirations,” he said.
He asked the cabinet and parliament to adopt “urgent reform measures” that would include spending reductions and efforts to find non-oil sources of income.
Kuwait posted a budget deficit of 1.094 billion dinars ($3.6 billion) in the five months through Aug. 31, after a payment into the Future Generations Fund, which is part of its sovereign wealth fund, official data shows.
That amount is small compared to the country’s huge fiscal reserves, and Kuwait is better able to cope with cheap oil than most of the Persian Gulf Arab oil exporters. Nevertheless, officials say the plunge in oil prices means the country must go ahead with long-delayed fiscal reforms.
A range of subsidy cuts is under consideration–local media reported this week that domestic gasoline prices might almost double, though they would remain among the lowest in the world–and the government has said it plans eventually to impose corporate tax on local firms.
