Kuwait to review $16 bln annual subsidies - paper

Reuters

KUWAIT, Nov 10 (Reuters) - Kuwait's government plans to forma special committee to review subsidies on goods and serviceswhich are costing the Gulf Arab state more than 4.5 billiondinars ($15.9 billion) a year, daily al-Qabas reported onSunday, citing government sources.

Like other wealthy countries in the region, Kuwait does nottax earnings and provides a generous welfare system for itscitizens. All residents, including foreigners, benefit fromsubsidised petrol, cheap electricity and water, while Kuwaitinationals get extra support for housing and food.

These generous spending programmes, which al-Qabas saidaccount for 22 percent of the annual budget, are often cited byanalysts as one of the reasons why the region largely escapedArab Spring-style unrest.

However, Kuwaiti ministers have warned that stateexpenditures will exceed oil revenues within a few years ifspending keeps rising at the current rate. The InternationalMonetary Fund (IMF) says this could happen as early as 2017while the government believes there could be a budget deficit in2021.

Finance Minister Sheikh Salem Abdulaziz al-Sabah firstsuggested last month that Kuwait might review its subsidiessystem, as encouraged by the IMF. Sheikh Salemis an advocate of cutting spending and is believed to be behindthe push to change the subsidies system.

IMF chief Christine Lagarde is due to speak at a centralbank event in Kuwait later on Sunday.

Al-Qabas newspaper said the committee, made up ofrepresentatives from government ministries, would look at allgoods and services, including subsidies for tuition fees, sportsclubs, marriage grants, benefits for the disabled and theadditional support given to farmers and fishermen.

The plan is to make sure that subsidised services reach onlythe people who need them, the paper said.

Kuwait's Prime Minister also joined in the debate aboutspending last month, saying that the welfare state wasunsustainable and that the major OPEC oil producer needed to cutspending and consumption of its natural resources.

Any such plans may run into problems in parliament, wheremany lawmakers campaign to raise benefits and say the state cansave money by eliminating wasteful spending and bureaucracyinstead.

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