Kuwait Govt Submits Draft Law On Borrowing To Cover State Budget Deficit

The government has submitted a draft law on obtaining loans from international and local financial institutions to address the State’s budget deficit, says Rapporteur of Financial and Economic Affairs Committee in the National Assembly MP Saleh Ashour.

However, Ashour argued that there are alternatives for the government before resorting to borrowing, such as utilizing funds of government investment agencies. He said these funds should be directed to the general budget of the State.

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He pointed out Kuwait Investment Authority (KIA) is responsible for investments while surplus from investments must be transferred to the general budget, clarifying that other government entities are not authorized to invest.

It is worth mentioning that the draft law which the government referred to the National Assembly stipulates the need to grant permission to the government to obtain public loans and financing from local and international financial institutions within a period of not more than 20 years and the amount should not exceed KD 25 billion.

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The draft law consists of eight articles on borrowing from local and international banks, stating the loan payment period is 30 years starting from the date of finalizing the loan contract. It also stipulates that the Central Bank of Kuwait (CBK) shall act on behalf of the Ministry of Finance, in coordination and consultation with the finance minister, to conclude, manage and execute general loan contracts and financing operations in Kuwaiti dinars or other currencies according to the accepted financial methods and instruments.

It mandates Kuwait Investment Authority (KIA) to act on behalf of the Ministry of Finance and in coordination with the minister of finance in order to conclude, manage and implement general loan contracts and major foreign currency convertible transactions in various international financial institutions with recognized financial instruments.

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The draft law allows the Ministry of Finance to fulfill its obligations to government agencies, public institutions and the like by issuing bonds, ‘sukouk’ or instruments and borrowing or direct financing from financial or other institutions and conventional financial instruments; indicating the Finance Ministry shall set the appropriate amount paid in these cases.

 

SOURCE : ARABTIMES

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