Author Topic: Kuwait ends diesel subsidies over deficit fears  (Read 180 times)

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Offline EC

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Kuwait ends diesel subsidies over deficit fears
« on: June 10, 2014, 03:58:49 AM »
Technically, this should be in Economy, but it raises a few VERY interesting questions.

KUWAIT CITY (AFP) - The Kuwaiti government has decided in principle to end subsidies on diesel fuel but will deal with any negative impacts on consumers before implementing the decision, the cabinet said.

Last month, the OPEC member's government warned that spending outpaced revenues and this could lead to a budget deficit in 2017/2018 after years of surpluses.

"The council of ministers has decided in principle to stop subsidies on diesel," a statement said late Monday.

But the cabinet is waiting for a study by the higher planning council on ways to deal with possible negative effects on consumers.

Oil Minister Ali al-Omair told parliament three weeks ago that ending subsidies on diesel would save around $1 billion (735 million euros) a year out of total subsidies of around $18 billion.

Diesel is currently sold at around $0.20 a litre.

The step is one of several recommendations by a government committee formed last October to review subsidies on all services and commodities after costs have skyrocketed.

Finance Minister Anas al-Saleh told parliament the average annual growth in public spending was 20.4 percent during the past decade against a 16.2 percent for revenues.

The ministry has urged major cuts in subsidies, saying it was impossible for the state to sustain growth in wages and continue them.

Between 2005 and 2013 subsidies rose more than fourfold, from $4.1 billion to $18 billion, an annual growth rate of 23 percent, the ministry said.

Oil income rose from $45.9 billion in 2005 to $106 billion last year.

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We always knew that in the oil rich countries "This too shall pass." Is this the first inking of the money wells running dry?
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