The International Monetary Fund has announced the economic challenges facing Kuwait due to the outbreak of the new Corona virus. In the country, stressing that Kuwait faces great challenges.
Fighting the Corona epidemic
The International Monetary Fund called on the Kuwaiti government to keep fighting the epidemic and mitigating its effects in its priorities. Until a final recovery is achieved, especially supporting the most vulnerable groups.
The IMF mission said, in a statement, that Kuwait needs strong financial control and structural reforms, to preserve financial margins. Preventive and promote economic growth.
The statement noted that rapid and well-coordinated policy responses by the Kuwaiti authorities helped protect public health. And reduce the economic impacts of the “Covid-19” crisis.
He added: “The banking sector continues to enjoy good liquidity and capital, benefiting from the regulatory supervision of the Central Bank. And strong fenders before entering into the crisis.
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The statement pointed out that the economic challenges posed by the epidemic are still significant.
The Kuwaiti economy
He stated that the Kuwaiti economy recorded a contraction of 8 percent over the past year, under pressure from the repercussions of the pandemic and the drop in oil prices. Besides, the commitment to “OPEC +” cuts.
The fund monitored a 6 percent contraction of the non-oil economy over the past year, with the public finances deteriorating. Significantly compared to the previous year.
And he expected a gradual recovery in the year 2021, supported by the recovery of domestic and foreign demand, with the continuation of vaccination operations.
Kuwait and its worst economic crisis
Kuwait is experiencing one of its worst economic crises, due to the effects of the Corona virus and the drop in oil prices, the main source of more than 90% of government revenues. What might push it to resort to liquidating sovereign assets to fill the budget deficit.
Governmental alternatives to providing liquidity face a legislative rejection within the Kuwaiti parliament, whether for the public debt approval law, which has been suspended since 2017. Or the liquidation of assets at the sovereign fund, which amounts to about $ 560 billion.
A government document
In a related context, a government document issued by the Kuwaiti Ministry of Finance revealed the purchase of a new tax system in preparation for implementing taxes in the country.
This comes, despite the public discontent that coincided with the announcement of the government’s plans to impose taxes. During the next period.
The document revealed that the first tests of the tax implementation plans will begin in September, simultaneously. With the approval of the necessary legislation by consensus between the government and the Kuwaiti National Assembly.
According to the document, it is planned to apply the tax system. By adopting four laws regulating this process.
The document also stated that the Kuwaiti Ministry of Finance will use the integrated tax operation system, known as the ITAS system.
While a tender will be launched from next month for this purpose, in addition to the use of international expertise to operate the system and train national cadres to use it.
In the context, a Kuwaiti government source said that the government action program that was submitted to the Kuwaiti Parliament included three laws. A proposal for taxes and an increase in government service fees, stressing the government’s seriousness in applying taxes as part of a comprehensive economic reform program.
The source stated, according to “Al-Araby Al-Jadeed”, that the financial crisis that has worsened during the recent period as a result of the dangerous repercussions of the Corona pandemic. It made the government speed up reform measures, impose taxes and increase fees.
He pointed out that the next stage requires a serious confrontation of the successive financial crises.
Lack of liquidity
The source pointed to two cash shortages that threaten the government’s ability to pay the salaries of workers in government institutions. In addition to the budget deficit crisis, which has exacerbated dangerously, which requires a serious pause from the government.
This comes in particular in light of the popular and parliamentary rejection of the government’s plan to withdraw about $ 17 billion from the Generations Fund.
He added that there are government plans that have been studied during the last period, to reconsider the support provided to citizens.
He indicated that taxes will finance the new subsidy system. Earlier, the Kuwaiti Cabinet announced the estimated budget. For the year 2021.
The total expenditures amounted to $ 76 billion, and the expected deficit is approximately $ 40 billion.
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