Kuwait to buffer impact of fuel price hike

06 October 2016

Gulf state scales down earlier plan to enforce fuel price reform

The Kuwaiti government will subsidise 75 litres of fuel a month for its citizens, National Assembly speaker Marzouq al-Ghanim confirmed on 5 October, according to state-run Kuwait News Agency (KUNA).

Earlier in the day, the government appealed a decision to raise the price of fuel, which came into effect on 1 September. The latest subsidisation will be equivalent to 30 per cent of the proposed fuel hike implemented in September.

“Kuwaiti citizens should be compensated for any fuel price increases,” KUNA quoted Al-Ghanim as saying. Liberating subsidies on fuel does not link them with international fuel prices, he added.

The decision was taken after a meeting between the government’s legislative and executive authorities.

The subsidies committee will review prices on a monthly basis to “economise” the state budget and also fuel consumption. Kuwaitis consume a monthly average of 240 litres of fuel – one of the highest in the world.

The cabinet had endorsed a plan in August to raise the prices of gasoline by as much as 73 per cent to “start rationalising fuel subsidies where the prices will be restructured in harmony with the average rates”.

The plan met with much opposition from parliamentarians, with a court demanding the government abolish the plan in late September, nearly a month after it came into effect.

Citing inflation in prices of commodities and goods, MPs demanded compensation for citizens. According to the country’s statistics office, inflation for August increased by 3.8 per cent compared with the same period last year.

Oil revenues comprised 95 per cent of Kuwaiti government revenues, before the slump in oil prices compelled the authorities to find alternatives to finance the growing budget deficit.

The Opec member, which benefited from 16 years of surplus, posted its first fiscal deficit of KD4.6bn ($15.2bn) during the past financial year. It has also been the most reluctant in the GCC to implement pricing reforms for fuel and electricity.

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