Public spending unsustainably high
KUWAIT CITY: The governor of the Central Bank of Kuwait, Sheikh Salem Abdulaziz Al-Sabah, said Monday he has resigned in protest against the country's steep rise in spending.
"Public spending has increased to unprecedented and unsustainable high levels which directly restricts the bank's ability to achieve fiscal and monetary stability," Sheikh Salem said in a statement cited by the official KUNA news agency.
The 61-year-old chief banker also cited "challenges to domestic economy" as another reason for his resignation which came after serving for more than 25 years in the post.
"I have exerted all efforts to highlight the urgent need to deal with major structural defects in the national economy," he said.
"Although these efforts were accepted and supported, they were never backed with tangible measures to launch fiscal reforms as a gateway for needed economic reforms," he said.
"As a result, the structural defects worsened and their risks increased," although their real impact has been reduced by high oil prices, Sheikh Salem said.
Kuwait receives around 95 percent of its public revenues from oil income.
Buoyed by 12 consecutive years of large budget surpluses thanks to high oil prices, spending has more than tripled over the past six years from just $23 billion to over $70 billion, mostly on wages, subsidies and grants, based on official figures.
Local economists have warned that Kuwait, which says it sits on about 10 percent of global crude reserves and pumps around 3.0 million barrels a day, will not be able to sustain this rise in spending, particularly if oil prices drop.
They said that about 85 percent of this fiscal year's budget of $70 billion is devoted to current spending, mainly wages and subsidies, while less than 12 percent goes for investments.
About 80 percent of the national workforce of 380,000 are employed in government jobs where salaries are high and working hours are shorter than the private sector, which employs around 1.8 million foreign workers.
According to official data, 52 percent of Kuwait's citizens are below 20 years old and 41 percent are under 15, which means that hundreds of thousands of Kuwaiti youth will enter the job market soon.
Experts have insisted that the government will not be able to create jobs for all of them.
Sheikh Salem was behind the decision in May 2007 to de-peg the Kuwaiti dinar from the US dollar and re-link it to a basket of currencies in a bid to limit the impact of high inflation.
He has frequently warned in public of the government's highly expansionary fiscal policy and the impact of the rapid rise in spending on the future of Kuwait.
Sheikh Salem thanked all the finance ministers he had worked with and the former and incumbent CBK board members, "who helped me perform my duties and actively contributed to all the policies and decisions adopted by the bank." He also expressed his gratitude to the managers and staff "whose support played a crucial role in the development of the bank and its unique achievements in various fields."
Meanwhile, a source revealed the multimillion deposit scandal has prompted Sheikh Salem to resign - the same reason for the departure of the former premier, Sheikh Nasser Al-Mohammad Al-Sabah, and the downfall of ex-MPs implicated in the case, excluding MP Saleh Ashour.
According to the source, a number of MPs-elect asked HH the Prime Minister Sheikh Jaber Al-Mubarak in recent consultations on the formation of the new government to dismiss the CBK governor in order not to disrupt the work of the parliamentary investigation panel, which will be formed in the coming days.
Other sources, however, claimed that Sheikh Salem resigned because he is fed up and upset with the way the finances of the State are being managed. They explained he is not happy with the continuous growth of public expenditures, particularly since it threatens the ability of the nation to achieve financial balance in the next few years.
On the other hand, former MP Mohammed Barrak Al-Mutair has called on Sheikh Salem to rescind his decision because Kuwait badly needs him, considering that the poor performance of global financial markets and the economic crisis in many parts of the world.
He argued the outgoing governor has exerted tremendous efforts to protect the Kuwaiti economy in spite of the difficulties he had to face due to the recent incidents in and outside the country. He asserted Sheikh Salem has wisdom and sharp economic vision that enabled him to deal with the volatile economic and financial conditions.
© Arab Times 2012
