Logo of Phnom Penh Post newspaper Phnom Penh Post - IMF urges Kuwait to accelerate reforms, impose taxes

IMF urges Kuwait to accelerate reforms, impose taxes

Content image - Phnom Penh Post
The IMF said that without reforms, Kuwait’s financing needs are projected to grow rapidly, accounting for $180 billion over the next six yearse. afp

IMF urges Kuwait to accelerate reforms, impose taxes

The International Monetary Fund on Monday urged OPEC member Kuwait to introduce a package of reforms that includes imposing taxes and phasing out subsidies to plug a chronic budget deficit.

Kuwait, which heavily depends on oil for almost 90 per cent of its revenues, has been hit hard since crude prices crashed in mid-2014 and earlier this month approved a budget with a huge shortfall for the sixth year in a row.

Nevertheless spending, mostly on hard-to-reverse categories such as salaries and social aid, expanded by 25 per cent only in the past two fiscal years while the public wage bill has grown by a bout 6.0 per cent annually, the IMF said.

Kuwait, which pumps 2.7 million barrels of oil per day, has huge fiscal reserves estimated at $644 billion by the IMF.

Unlike other Gulf states, Kuwait has a lively parliament which has repeatedly blocked government plans to impose taxes or charges on public services.

“Delays in fiscal reforms would further amplify fiscal financing needs while slow progress on the structural front would dampen growth,” the IMF said in a report.

Kuwait’s economy grew by just 0.7 per cent last year and is forecast by the IMF to grow by 1.2 per cent this year.

The IMF said that without reforms, the government’s financing needs are projected to grow rapidly, accounting for $180 billion over the next six years.

The global lender proposed specific reforms over the next decade to help the Gulf state adjust its finances.

The plan calls for gradually reducing public spending and curtailing the public wage bill, which accounts for nearly half of public expenditures, by making private sector jobs more attractive.

The government should phase out fuel, electricity and water subsidies and social aid, which currently account for 7.5 per cent of GDP or $10.3 billion annually, IMF said.

It called on the government to follow in the footsteps of Saudi Arabia, the United Arab Emirates and Bahrain in imposing a five per cent value-added tax and excises on luxury goods, as well as broadening profit tax on domestic companies.

“To gain broad support, the proposed fiscal measures should be part of a comprehensive reform package that fosters private sector growth and jobs, reduces waste and improves the quality of public services, and strengthens government accountability and transparency,” the IMF said.


  • PM: West unfair to Cambodia

    Prime Minister Hun Sen released a message celebrating the International Day of Peace on Monday, saying that some major powers and western countries had been systemically cooperating to put political pressure on Cambodia as they did in the 1970s and 1980s. Hun Sen said pressuring

  • ‘Bad news is an investor’s best friend’ – unlocking investment potential in Cambodia

    It is time to shop. Economic woes provide good pickings for investors if they know where to look The poem If, written by English Nobel laureate poet and novelist Rudyard Kipling for his son circa 1895, is widely perceived as fatherly advice for John who would

  • PM requests Russia’s Covid vaccine

    Prime Minister Hun Sen has requested that Russia provide Cambodia with its Covid-19 vaccine after the former announced it planned on mass vaccinating its population next month. The request came on Thursday through the prime minister’s Facebook page as he met with Anatoly Borovik,

  • First ‘mobile kitchen’ in Cambodia enters service

    A catering company recently rolled out Cambodia’s first “mobile kitchen” – a $50,000 container capable of serving up to 200 people at a time. The kitchen is the brainchild of Seng Hok Heng Catering Services. At 4.4m-high, 6.8m-long and 2.4m-wide (expandable to 6.8m), the kitchen is equipped

  • Kingdom, China rebut basis for US sanctions

    The Council for the Development of Cambodia, the Ministry of Foreign Affairs and International Cooperation, and Tianjin Union Investment Development Group Co Ltd (Tianjin) have responded to US sanctions on Union Development Group Co Ltd (UDG), a Chinese-owned company currently developing the sprawling $3.8 billion Dara

  • Influenza breaks out in eight provinces

    Nearly 600 people have been infected with influenza in eight provinces in the past month, Ministry of Health spokesperson Or Vandine said. The ministry is advising extreme caution. A report released by Vandine on Saturday said the Ministry of Health observed transmissions of influenza between August 15