This $ 600 billion fund was caught in a power struggle – .

This $ 600 billion fund was caught in a power struggle – .

A $ 600 billion sovereign wealth fund is caught in the sights of a political power struggle shaking one of the richest countries in the world.
the The Kuwait Investment Authority, the world’s oldest public investment vehicle, has been in limbo since the term of its board of directors expired two months ago. A new term has not yet been approved as political differences degenerate into disagreement over the composition of the nine-member board, according to a person familiar with the matter.

The uncertainty now hanging over the KIA, which manages Kuwait’s immense oil wealth through two key funds, is emblematic of a wider malaise that is paralyzing policy-making, has prompted rating agencies to point out. guard against demotion and perversely left the government of a great An OPEC crude exporter looking for cash. KIA officials were not immediately available for comment.

This is all part of a deep standoff between members of the Gulf’s only elected parliament and a government whose leader is appointed by the ruling emir, a standoff that has kept the state from borrowing and barely left him enough to pay public sector wages. The conflict is also delaying investment and economic reforms, including an overhaul of the welfare state which the government says is needed to end eight consecutive years of budget deficits.

“The signals this sends are very negative,” said Kuwaiti businessman and economist Abdullah Al-Shami, owner of two companies specializing in medical and financial services. “It’s a new low and I can justify it by saying that we have two political agendas and therefore two economic agendas. The first goes towards new liberal policies adopted by the West and the other wants to maintain the social protection system as it is.

Parliament Speaker Marzouq Alghanim on Sunday called for an extraordinary session this week to approve the budget, an urgent item currently on the assembly’s agenda. In a post that appeared to be aimed at warring politicians, he said the interests of citizens should take precedence over all political differences.

One of the richest nations in the world calls for wealth fund as liquidity dries up

Once a booming economy at the forefront of Arab Gulf affairs, Kuwait has long been eclipsed by neighbors unhindered by elected institutions and determined to secure their seat on the international stage. Dubai has established itself as the business capital of the region, while in Saudi Arabia, Crown Prince Mohammed bin Salman has embarked on an ambitious plan to rebuild the economy.

In contrast, the new Emir of Kuwait is already 80 years old and faces an outspoken 50-member National Assembly dominated since the December elections by independent and opposition lawmakers representing increasingly angry voters. against the status quo and pushing a populist agenda.

Meeting of the Parliament of Kuwait at which Sheikh Nawaf al-Ahmad Al-Sabah was sworn in.

Photographer: Yasser AL-Zayat / AFP / Getty Images

Kuwait’s death the former emir in September left a void in a decision-making machine that looks to the ruler to set the national trajectory, dashing early hopes that a change at the top would imbue the country with a new sense of purpose.

“People are trying to survive in the private sector but the government has no strategy,” said Khaled Al-Ansari, a partner in a law firm and involved in three family businesses. “The future is unimaginable. We see Dubai and Saudi Arabia trying to attract business and grow. They might survive better than us, based on what they’re doing now.

Suppression of corruption

Allegations of corruption, money laundering and influence peddling by judges and high-ranking officials have dominated social media in recent months, as the government embarks on an unprecedented and very public cleansing that, He hopes will appease criticism and pave the way for tax reforms that can get the economy back on track.

A former prime minister and other senior officials have been arrested as part of the anti-corruption campaign, but it has been dismissed as a facade by many Kuwaitis as parliamentarians are engrossed in a tug-of-war unfolding in the House.

Opposition lawmakers have focused their attention on the attempt to oust the president and overturn a government-backed vote that prevents them from questioning the prime minister until the end of 2022. They have pledged to block regular sessions until their demands are met, thus crippling decision making.

“We are asking the emir to intervene because we refuse to deal with a prime minister who violates the constitution and a president who won by government votes,” said opposition MP Mubarak Al-Hajraf. “Now we have the former Prime Minister and his Home Secretary in prison for embezzlement. People are more convinced by our rhetoric.

One of the richest Petrostats in the world is strapped for cash

Amid the bickering, parliament paid little attention to a bill that would allow the government to issue international bonds to finance the deficit, and opposed any reallocation of government grants. State, although almost three-quarters of expenditure is absorbed by salaries. and subsidies.

The government needs parliamentary approval for most of the major initiatives of its economic program, including the introduction of a value added tax and an excise tax to increase non-oil revenue as well as a plan to rethink state subsidies and privatize some of the state-owned assets of Kuwait. . All have been stranded in the past decade.

With a deficit of $ 3.3 billion per month, the government resorted to swift action to meet financial commitments last year when oil prices fell and the pandemic struck. If the situation continues as it is, Kuwait will build a cumulative budget deficit of $ 184 billion over the next five years.

“There is a real lack of leadership. The transition to power as well as the pandemic test offered the opportunity to build national unity and a common goal, but that moment was lost, ”said Kristin Diwan, senior resident researcher at the Arab Gulf States Institute. in Washington. “There is no escape from politics in Kuwait. Leaders must build coalitions for change by engaging the public and parliament. It is an arduous test, but with potential gains inaccessible to more autocratic leaders. “

A backward trajectory


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