The Central Bank of Kuwait raised its discount rate by 25 basis points to 2.75% effective from Thursday, it said in a statement on Wednesday, Reuters reported. The decision was in response to inflationary pressures, bank Governor Basel al-Haroon said in the statement. The bank had also increased the rate by 25 bps on July 27, after a 75 bps hike by the U.S. Federal Reserve. All Gulf countries have their currencies pegged to the dollar except Kuwait, which pegs its dinar to a currency basket including the dollar.
When Kuwait’s prime minister returns to office in the coming weeks, he faces an apparent paradox: the Gulf state with a $550bn sovereign wealth fund is running short on cash to pay ballooning public sector salaries, the Financial Times reported. Oil accounts for 90 per cent of its revenue, but slumping prices have hit the western ally’s income hard, putting its forecast deficit close to 40 per cent of GDP, higher than it was in the 1990s, during the financially perilous aftermath of the first Gulf war when Iraq invaded Kuwait.
Kuwait’s parliament passed a long-awaited insolvency law on Tuesday to help attract investment and commerce, Bloomberg Law reported. The absence of insolvency protection has been cited as a significant deterrent to foreign investment. The new law restructures the legal framework for bankruptcy to focus on rehabilitating troubled companies rather than liquidation.