Kuwait’s acting Finance minister Anas Khalid Al Saleh announced that the cabinet has agreed on a string of reforms by approving the introduction of a proposed 10% corporate tax on profits and privatizing some government services and facilities amongst them are services at the airport, ports, managements of hospitals and schools as well as facilities of Kuwait Petroleum Company.
Merging ministries and government agencies and partially lifting subsidies on basic commodities are also being considered.
The oil-rich country has been battling with the low oil prices because it generates most of its revenue from oil exportations and the government is obliged to revise its spending policy after revenue dropped by 60% in 2015 and a budget deficit of $40 billion has been projected for fiscal year to begin on April 1.
Kuwaitis are accustomed to free healthcare, tax-free incomes and government subsidies but the situation could soon change as the broad economic reforms eye reducing public spending and widening private sector growth.
A timeline has not been presented for the implementation of the reforms and minister Al-Saleh said the governor of the central bank Mohammed al-Heshal had stressed the need for the government to assure the world that the country’s public finances are sustainable. Kuwait’s credit ratings have been put on review for a possible downgrade by Moody’s Investors Service and Governor al-Heshal warned that a slow reaction from authorities to handle the situation will “reflect negatively” on the rating “because of the negative consequences on financial institutions, and then it may affect monetary policy.”
Kuwait’s parliament, known to be one of the most independent institutions in the region, have usually challenged government proposals and could slow down the implementation of the reforms.