KUWAIT (Reuters) - Kuwait needs to push through economic reforms despite higher oil prices, the Gulf state’s ruler said on Tuesday, urging parliament to work with the government to implement measures aimed at diversifying revenues and developing the economy.
Kuwait, whose state finances are among the strongest in the region, has been trying to introduce new taxes and reform a lavish welfare system to curb state spending.
“I hope that the recent temporary improvement in oil prices does not obstruct this important path, which aims to protect future generations,” Emir Sheikh Sabah Al-Ahmad Al-Jaber al-Sabah told parliament in a speech at the start of its new session.
Critics say parliament has long hindered attempts at fiscal discipline. The current parliament, elected in late 2016, has yet to pass any major elements of government reforms introduced after oil prices plunged in 2014.
Parliament’s budget committee said last May that Kuwait would not implement a value-added tax before 2021, but would push ahead this year with excise taxes on selected products, such as tobacco and sugary drinks.
The Gulf’s six oil-exporting countries originally agreed to introduce a 5 percent VAT at the start of 2018, and Saudi Arabia and the United Arab Emirates did so. The other states have delayed because of political opposition, potential damage to consumer spending, and the technical challenges of a new tax.
The Gulf economies, including Kuwait’s, are likely to accelerate in coming years as governments boost spending, but growth will not return to the levels enjoyed before oil prices fell in 2014, a quarterly Reuters poll of economists found. [nL8N1WW5P2]
Kuwait has the most powerful parliament in the region, but a series of assemblies have been dissolved in recent years amid power struggles between the opposition and the cabinet, which is dominated by the ruling family.
“I will not allow us to stray from the blessing of democracy ... to a curse that threatens stability in our country,” the emir said, criticising what he described as a “feverish race” by some MPs to question ministers.
The assembly can pass legislation and question ministers, but the emir has the final say in state matters. He picks a prime minister, who selects a cabinet.
Reporting by Ahmed Hagagy and Maher Chmaytelli; Writing by Ghaida Ghantous; Editing by Andrew Heavens