Central Bank of Kuwait Photo: CentralBanking

One of world’s richest petrodollar countries is running out of cash: Report

*It’s been a gradual decline for Kuwait as cheap oil forces debate on state handouts across the Gulf

*We’re going to wake up one day and realise we finish off all our savings ─Kuwaiti Company Executive

Isola Moses | ConsumerConnect

Against the backdrop of a recent decline in crude prices in the international oil market and subsequent deficits recorded by a number of global oil-producing countries, Barak Al-Sheetan, Finance Minister of Kuwait, one of the world’s petrodollar states, has warned Kuwaiti populace that there is not enough cash to pay salaries beyond October 2020.

ConsumerConnect gathered that Al-Sheetan’s predecessor, Anas Al-Saleh, had warned in 2016 that it was time to cut spending and prepare for life after oil.

However, he was ridiculed by a population raised on a seemingly endless flow of petrodollars at the time, report said.

Four years on, one of the world’s richest countries is currently struggling to make ends meet as a sharp decline in energy prices raises profound questions over how Gulf Arab states are run.

It was learnt that Al-Saleh’s long gone as Finance Minister, having shifting to other cabinet positions.

Mariam Al-Aqeel, a successor, moved on in January, two weeks after suggesting Kuwait restructure a public-sector wage bill that’s the single biggest drag on state finances.

Her replacement, Barak Al-Sheetan, in August that there wasn’t enough cash to pay state salaries beyond October this year.

Report indicates that as the country is slow to adjust big-spending habits as oil revenues fall, the Gulf states are hurtling toward a moment of economic reckoning.

This development has prompted a renewed debate over the future of nations that for decades bought popular loyalty with state largesse.

Fawaz Al-Sirri, who heads Bensirri political and financial communications firm, in Kuwait, said: “We’re going to wake up one day and realise we went through all our savings, not because we didn’t check our bank statement but because we looked at it and said, it’s probably a bank glitch, and then bought the latest Rolex.”

Kuwait’s oil and gas exports this year are set to drop to almost half of 2014’s highs, says report.

The OPEC club of oil-exporters has revived crude from its historic drop this year, but $40 is still said to be “too low”.

The novel Coronavirus pandemic and shift towards renewable energy threaten to keep prices depressed for some time now.

In Kuwait, however, a standoff between the elected parliament and a government whose prime minister is appointed by the emir has led to policy gridlock.

Lawmakers have thwarted plans to reallocate state handouts and blocked proposals to issue debt.

Instead, the government has almost exhausted its liquid assets, leaving it unable to cover a budget deficit expected to reach the equivalent of almost $46 billion this year.

It’s been a gradual decline for Kuwait, which in the 1970s was among the most dynamic Gulf states revelling in oil wealth, with its outspoken parliament, entrepreneurial heritage and educated people.

But Kuwait has money, plenty of it, stashed away in an unbreakable fund — the world’s fourth-largest at an estimated $550 billion.

Touching the Future Generations Fund, designed to ensure prosperity after oil runs out, is a controversial proposition.

Some Kuwaitis say the time has arrived. Opponents warn that without diversifying the economy and creating jobs, the savings would run out in 15-20 years.

Jassim Al-Saadoun, Head of Kuwait-based Al-Shall Economic Consultants, said: “It’s not a solvency problem, although it’s considered a cash drought.”

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