DUBAI - Kuwait's political gridlock has strained state coffers but new efforts to resolve the impasse could signal an acceleration in reform momentum, the International Monetary Fund said.
A stand-off between the government and the elected parliament had paralysed legislative work, hindering efforts to boost state finances and enact measures including a debt law making it possible to tap global markets, a government priority.
The IMF said on Wednesday the oil-rich Gulf state would need to work on comprehensive reforms on items such as social benefits, the labour market, and the business environment.
"Sustained political gridlock has hobbled reforms and increased macroeconomic vulnerabilities, but a new high-level effort offers hope for resolving the impasse", the fund said in a statement.
"Efforts led by the Amir are underway to resolve the political impasse between government and parliament ahead of the next parliamentary session starting October 26, which could pave the way for accelerating the reform momentum", it said.
Emir Sheikh Nawaf al-Ahmad al-Sabah on Wednesday paved the way for an amnesty to pardon dissidents, which has been a major condition of opposition lawmakers to end a months-long standoff with the appointed government that has held up planned fiscal reforms.
Although Kuwait does not permit political parties, it has given its legislature more influence than similar bodies in other Gulf monarchies, including the power to pass and block laws, question ministers and submit no-confidence votes against senior government officials.
Kuwait's finances are set to improve this year thanks to higher oil prices, after the coronavirus downturn led to a budget deficit of 15.4% of gross domestic product in 2020/21 fiscal, said the IMF, predicting a surplus of 2% of GDP in the 2021/22 fiscal year.
The economy is expected to switch to a 0.9% growth this year after a 8.9% contraction in 2020, said the fund.
(Reporting by Davide Barbuscia,Editing by William Maclean) ((Davide.Barbuscia@thomsonreuters.com; +971522604297; Reuters Messaging: firstname.lastname@example.org))